Corporate Effectuation: An explanatory study about the ...availability, communication, rules and...
Transcript of Corporate Effectuation: An explanatory study about the ...availability, communication, rules and...
Corporate Effectuation: An
explanatory study about the
Application of Effectuation in a large
established company
Luise Kautschur
Master in Business Administration Double Degree
Track Innovation Management and Entrepreneurship
M.Sc. Thesis
21st of June 2016
Supervisors:
Dr. ir. Jeroen Kraaijenbrink
Martin Stienstra
The Netherlands Institute for Knowledge
Intense Entrepreneurship - Nikos
University of Twente
P.O. Box 217
7500 AE Enschede, the Netherlands
Faculty of Behavioral, Management and
Social Science
II
ABSTRACT
The purpose of this study is to explain company specific conditions in order to apply
entrepreneurial thinking and acting especially the logic of Effectuation in a corporate context.
The space industry currently experience a boom in the commercialization of space
technologies and the goal of a public access to space resulting in several small and medium
sized emerging innovative space companies increasing competitive pressure. Therefore, space
companies have to keep pace in this uncertain and fast developing market and should increase
their innovative power to stay competitive. Seeking at innovative leadership and power in the
space industry, companies apply planning and analysis approaches but only limited
entrepreneurial thinking and acting. To enhance the innovative power and the overall
performance of the firm, the dynamic and learning logic of Effectuation embedded in
entrepreneurial thinking and acting, is explained in a specific space company.
After literature research, conditions for corporate Effectuation are identified and serve as
underlying conditions for data collection. Qualitative data is gathered through 15 semi-
structures interviews with participants positioned in innovation related and non-innovation
related departments. After transcribing the interviews, data is analysed with the qualitative
data analysis tool atlas.ti using template analysis and consolidating interview answers and
comments. After three revised templates, the final template was created including the
resulting conditions of applying Effectuation in a corporate context. The final conditions are
separated in four different groups: organizational culture, organizational structure, human
capital, and innovation. Organizational culture factors are: failure treatment, experimentation,
top management support, and freedom to innovate. Organizational structure factors identified
are the following: number of hierarchical levels, organic management style, flexibility, and
separate organizational structure. The group human capital factors include: means-driven,
controllability, risk assumption, use of contingencies, cooperation, pro-activeness/ motivation,
capabilities, rewards, and an open mind-set. Lastly, innovation related factors include: time
availability, communication, rules and routines, active involvement of employees, and access
to resources/ expert knowledge.
This thesis contributes to the application of entrepreneurial thinking and acting in a corporate
context especially focusing on Effectuation and its development towards framework
conditions for applying this logic in large companies. Practically, the thesis offers managerial
implications on how to use entrepreneurial processes to enhance the innovative and
competitive power as well as the overall firm performance.
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TABLE OF CONTENTS
ABSTRACT .............................................................................................................................. II
TABLE OF CONTENTS ......................................................................................................... III
LIST OF FIGURES AND GRAPHS ........................................................................................ V
LIST OF TABLES ................................................................................................................... VI
1 Introduction ........................................................................................................................ 1
2 Literature Review ............................................................................................................... 6
2.1 Literature Approach ..................................................................................................... 6
2.1.1 Literature Collection ............................................................................................ 6
2.1.2 Literature Analysis ............................................................................................... 7
2.2 Challenges in Managing Innovations .......................................................................... 8
2.3 Corporate Entrepreneurship ......................................................................................... 9
2.4 Causation and Effectuation ........................................................................................ 13
2.5 The Application of corporate Effectuation ................................................................ 23
2.6 Conditions for the application of Effectuation in a corporate context ...................... 25
3 Methodology .................................................................................................................... 30
3.1 Research Design ........................................................................................................ 30
3.1.1 Data Collection and Strategy .............................................................................. 30
3.1.2 Sample and Time Horizon .................................................................................. 33
3.1.3 Data Analysis ..................................................................................................... 37
3.2 Ethical Considerations ............................................................................................... 43
4 Results and Discussion ..................................................................................................... 44
4.1 Participants and Group Comparison .......................................................................... 44
4.2 Challenges in Strategic Entrepreneurship and Innovation ........................................ 46
4.3 Application of corporate Effectuation ....................................................................... 52
4.4 The Extent of using Corporate Effectuation .............................................................. 59
4.5 Conditions of Implementing Corporate Effectuation ................................................ 62
4.5.1 Organizational Factors ....................................................................................... 63
4.5.2 Human Capital Factors ....................................................................................... 71
4.5.3 Innovation Factors .............................................................................................. 76
5 Conclusion ........................................................................................................................ 80
5.1 Managerial and Theoretical Implications .................................................................. 83
5.2 Limitations and Future Research ............................................................................... 85
IV
APPENDICES .......................................................................................................................... VI
REFERENCES ....................................................................................................................... XX
V
LIST OF FIGURES AND GRAPHS
Figure 1 A model of corporate entrepreneurship context (Kuratko, 2010: 130). ..................... 11
Figure 2 Goal Orientation versus Mean Orientation (Sarasvathy, 2001b:3) ............................ 15
Figure 3 Framework of Prediction and Control (Wiltbank et al., 2006: 983) .......................... 16
Figure 4 Expected return versus Affordable loss (Faschingbauer, 2010: 52) .......................... 18
Figure 5 Suicide Quadrant of Effectuation (Sarasvathy, 2001b: 7) ......................................... 19
Figure 6 Contrasting the textbook (causal) model of marketing with effectuation (Sarasvathy,
2008: 39) .................................................................................................................................. 20
Figure 7 Dynamic model of Effectuation (Sarasvathy, 2008: 101) ......................................... 22
Figure 8 Framework Conditions for implementing Effectuation in a corporate context
(adapted from Morris and Kuratko, 2008; Johansson and McKelvie, 2012; da Costa and
Brettel, 2011; Grichnik et al., 2010; Blekman, 2011; Sarasvathy, 2001a) ............................... 26
Figure 9 Template Analysis for this research (based on King, 2012) ...................................... 39
Figure 10 Code Family Structure ............................................................................................. 40
Figure 11 PAVE strategies (adapted from Wiltbank et al., 2006: 983) ................................... 42
Figure 12 Conditions on applying Corporate Effectuation ...................................................... 80
Graph 1 Distribution of Preferred Strategy according to number of participants .................... 60
Graph 2 Distribution of PAVE groups according to number of participants ........................... 61
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LIST OF TABLES
Table 1 Comparison of Causation and Effectuation (adapted from Kraaijenbrink, 2008: 3) .. 14
Table 2 Literature Overview .................................................................................................... 29
Table 3 Research Design of this thesis ..................................................................................... 30
Table 4 Interview participants list ............................................................................................ 36
Table 5 Group Analysis (adapted from King, 2012:434) ......................................................... 45
Table 6 Group of Challenges in Innovation ............................................................................. 51
Table 7 Group comparison for Application of Effectuation .................................................... 56
Table 8 Comparison of PAVE groups ...................................................................................... 61
Table 9 Effectuation distribution according to group comparison ........................................... 62
Table 10 Group comparison analysis for Organizational Culture ............................................ 66
Table 11 Group comparison for Organizational Structure ....................................................... 69
Table 12 Group comparison for Effectual Factors ................................................................... 72
Table 13 Group comparison for Other Factors ........................................................................ 75
Table 14 Group comparison for Innovation Factors ................................................................ 78
Table 15 Summary of eliminated and included factors of template analysis ........................... 82
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1 Introduction
In order to keep pace with fast developing markets and new emerging markets
corporations have to promote and sustain competitive advantages (Covin and Miles,
1999:47). Corporate and strategic entrepreneurship are drivers of corporate growth
and wealth creation (Ireland, Kuratko and Covin, 2003) whereas strategic
entrepreneurship involves both opportunity seeking and advantage seeking resulting
in an enhancement of firm performance (Ireland, Hitt and Sirmon, 2003:963).
“Corporate Entrepreneurship provides potential means for revitalizing established
companies” (Zahra and Covin, 1995:44) whereas “[…] entrepreneurial attitudes and
behaviours are necessary for firms of all sizes to prosper and flourish in competitive
environments” (Barringer and Bluedorn, 1999: 421). Therefore, it is of advantage for
established companies to integrate entrepreneurial behaviour, acting and decision
making in their corporate context (Grichnik, 2010).
However, approaches to corporate entrepreneurship are mainly based on planning
and analysis approaches as well as ready-made business plans. This might be not
applicable for all companies as several established companies are strategically
planning based and risk averse. Especially established companies in the space
industry currently experience a boom in the commercialization of space technologies
aiming at the publicly availability of space and the exploration of Mars (Howell,
2015). Focusing this, several small and medium sized emerging innovative space
companies opening up new markets and new opportunities and increasing the
competitive pressure in this industry. Therefore, established space companies have to
keep pace in this uncertain and fast developing market and should enhance their
innovative power to stay competitive and to increase the firm performance. Seeking
at innovative leadership and power in the space industry, companies apply planning
and analysis approaches but only limited entrepreneurial thinking and acting. To
enhance the innovative power and the overall performance of the firm, the dynamic
and learning logic of Effectuation embedded in entrepreneurial thinking and acting is
explained.
In order to address a learning approach of corporate entrepreneurial processes and to
integrate entrepreneurship in the studied company, the logic of corporate
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Effectuation is studied in this thesis. Effectuation is a logic of entrepreneurial
expertise describing the decision making and problem solving process of expert
entrepreneurs (Sarasvathy, 2001b). This logic was a breakthrough in the
entrepreneurial decision making and entrepreneurial process literature which was
achieved by Sarasvathy (2001a) with her findings about teachable and learnable
principles of expert entrepreneurs. Research on corporate Effectuation encompasses
for example Marketing, R&D, Strategic Management, technology-based Ventures,
Business planning and Founders (Faschingbauer, 2010: 226, Johannson and
McKelvie, 2012; Wiltbank et al., 2006; Brettel et al., 2011). Brettel et al. (2011)
explored a positive relationship between the use of Effectuation and R&D project
success (process output and process efficiency) especially adapting affordable loss,
partnerships and contingencies.
However, only little is researched about conditions of applying Effectuation in an
established company. Blekman (2011) focuses on business modelling and corporate
effectuation stating that companies should stay strategically flexible in business
modelling including stakeholders pre-commitment and co-creation. In addition,
Blekman (2011) combines reframing, which is a method to predict and create radical
product innovation and services (2011:121), with corporate Effectuation including
cooperation and centring the product end-user. Furthermore, Blekman (2011)
emphasizes the learning aspect of the effectual logic linking it to the personal
development of employees in corporations learning how to think and act effectual on
the basis of the own live path (2011:173). Because of missing conditions for
applying Effectuation, conditions are adapted from corporate Entrepreneurship
grouping those in organizational culture factors (failure treatment, project evaluation,
experimentation, and top management support), organizational structure factors
(number of hierarchical levels, organic management style, and flexibility) and human
capital factors (effectual factors, high level of education, position in top
management, pro-activeness, individual attitude and capabilities) (Ireland and Webb,
2007; Hornsby et al., 1999; Kuratko et al., 1990, Hornsby et al., 2002; Covin and
Miles, 2007, Sarasvathy, 2001a; Moroz and Hindle, 2011, Ireland et al., 2003).
Research Goal and Research Question
As stated above, corporate entrepreneurship provides several factors positively
influencing entrepreneurial behaviour and processes in a corporate context. However,
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factors positively influencing Effectuation in a corporate context is only little
researched. Explaining specific conditions for corporate Effectuation and enabling
managers to apply this relatively logic to their company benefiting from enforced
competitive advantage and possibly new revenue streams for the company is the
identified research gap. Summarizing, the following research problem was identified:
the conditions of the application of Effectuation in the context of entrepreneurial
processes in large international corporations is barely researched.
Resulting from the research problem, the study has the following three goals:
Understand deeply peoples´ understanding, interpretation, motivation and
experiences about Corporate Venturing and Innovation processes within the
company (Ahmed & Shepherd 2006)
Explain already existing effectual processes within Innovation processes
Explain employees´ and managers´ opinion on the necessity and conditions of
implementing the logic of Effectuation in the corporate entrepreneurship
process of the space company.
To achieve the stated research goals, the resulting research question is the following:
What are the conditions for the application of Effectuation in a large
corporation?
For a detailed and investigative answer, the research questions is separated in three
sub research questions:
1. What is the employees´ and managers´ mind set of strategic entrepreneurship,
focusing on Innovation?
2. Which effectual principles are used in this company?
3. To what extent is Effectuation a solution for this company?
Those sub questions are the basis for the main research question and are answered
sequential as it is first necessary to get to know the status-quo of the entrepreneurial
process in the company, then analyse possibly existing effectual principles and lastly,
explain determining framework conditions for applying Effectuation in the
entrepreneurial process to benefit from its advantages in an possibly adapted
approach.
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The research question will be tackled in a qualitative approach undertaking
qualitative and quantitative research. The quantitative research results in a short
questionnaire aiming at better evaluating the interviewees´ attitude towards strategic
decision making and problem solving. Afterwards, the interviewees are asked semi-
structured questions in an interview regarding the above study goals. The detailed
methodological approach is explained in chapter 3.
Accomplishing those goals, this study possibly is an important step forward in
Effectuation literature examining the effectual logic in the context of strategic
entrepreneurship and Innovation in a specific large established company rather than
start-ups. Furthermore, the company is analyzed regarding existing effectual artifacts
and necessary conditions in order to apply Effectuation in the entrepreneurial process
of the firm. Additionally, firm specific conditions on applying Effectuation could be
helpful for other large firms in order to enhance the entrepreneurial process. Finally,
a generalization of found conditions could be made for a theoretical contribution.
Those aspects are further discussed in the chapters below.
Definitions
Effectuation: Effectuation is a logic of entrepreneurial expertise describing the
decision making and problem solving process of expert entrepreneurs (Sarasvathy,
2001b).
Effectuation process: “Effectuation processes take a set of means as given and focus
on selecting between possible effects that can be created with that set of means”
(Sarasvathy, 2001b: 245).
Causation process: “Causation processes take a particular effect as given and focus
on selecting between means to create that effect” (Sarasvathy, 2001b: 245).
Innovation: “Innovation is the process of engaging in behaviours designed to
generate and implement new ideas, processes, products and services, regardless of
the ultimate success of these new phenomena” (Unsworth, 2003:3) including both
idea generation (creativity) and idea implementation (Unsworth, 2001:294).
Corporate Entrepreneurship: “is the process whereby an individual or a group of
individuals, in association with an existing organization, create a new organization or
instigate renewal or innovation within that organization” (Sharma and Chrisman,
2007:18).
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Theoretical and Practical Contribution
The thesis contributes to the corporate entrepreneurship literature as well as
entrepreneurial processes and Effectuation applied in a corporate context.
In more detail, it contributes to entrepreneurial processes especially Effectuation and
it value for large companies. Furthermore, the study examines the application of
Effectuation in a corporate context applying corporate entrepreneurship literature to
Effectuation literature as corporate Effectuation is barley researched. This leads to
the last theoretical contribution examining corporate Effectuation, its principles and
the application field of innovation regarding conditions for Effectuation.
In a practical manner, this thesis contributes to innovation and strategic
entrepreneurship challenges in a specific space company giving managerial
implications under which conditions to apply Effectuation in this corporate context
and why it might be beneficial to apply it.
Structure of the Thesis
First, the literature overview in the field of corporate entrepreneurship and
Effectuation introduces the topic of the application of Effectuation and conditions for
applying Effectuation in a corporate context.
Second, the methodological approach explains how data was collected and analysed
and explains the sample of the study. Lastly, ethical considerations are made in order
to ensure ethical standards over the whole study.
Third, the result of qualitative data are shown for each factor and in group
comparison dividing the sample in three groups: initiators, experts, and contributor.
In the result section, first the sample and groups are seen holistically and are
analysed. After stating the results for challenges in strategic entrepreneurship and
innovation, the results for the real application of the effectual logic in this company
is analysed. Finally, the results for organizational, human capital and innovation
factors are shown separately in order to enable a differentiated view on conditions of
applying Effectuation in this company. After stating the results, those are discussed
based on current literature on corporate entrepreneurship and strategic
entrepreneurship literature after each family factor.
Fourth and last, conclusions are made stating managerial and theoretical implications
as well as limitations and future research topics. .
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2 Literature Review
2.1 Literature Approach
The literature review is elaborated in order to answer the raised research question and
to acknowledge especially Saras Sarasvathys´ research on Effectuation and
Causation as well as continued Effectuation research. Furthermore, the literature
review give insight in relevant previous research as well as emerged trends in that
research field (Saunders et al., 2012: 73). Additionally, the literature review also
aims at the following goals: avoidance to repeat studies, and the identification and
recommendation on further research (Gall et al., 2006).
The literature review has the following structure: first it is explained how literature is
collected, analysed, and selected. Second, the effectual logic is explained by means
of comparison to the contrary causal logic in order to explain the effectual principles.
And fourth, after discussing the application of the effectual logic in a venture and
corporate context in the third step, chapter 3.5 analysis existing framework condition
for the application of Effectuation in a corporate context.
2.1.1 Literature Collection
The literature collection was conducted in three steps.
First information about corporate and strategic entrepreneurship, and the logic of
Effectuation in general were gathered to get an overview about the topic and its
frame itself. Here, Google and Google Scholar were used for first information. In
corporate entrepreneurship literature a variety of studies appeared. The main focus
here was especially corporate entrepreneurship from high level papers and the paper
of researchers very active in this field. In addition to that, several homepages about
Effectuation, for example effectuation.org, effectuation.at and
corporateeffectuation.nl were found on the basis of general search. The homepage
effectuation.org gave insight in the topic and revealed several research topics and a
literature guide which was used as a basis for further literature search. The found
literature references and scientific papers on those respective websites was searched
via University of Twente and Technical University of Berlin facilities using both
Universities libraries database, their access to relevant scientific books and papers
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from different sources, for example JSTOR, TU-Service, Springer, EBSCOhost
Business Source Complete and Elsevier Science Direct.
Subsequently, the reference lists of respective articles were checked on relevant titles
and paper abstract for further research. The article was collected in the research
library if the article was closely linked to the theory of Effectuation, the application
of Effectuation in ventures and large established firms and conditions of how to
strategically implement the dimensions of Effectuation in an established company.
Third, merging with the second step, Google Scholar was used to search for key
words and key word combinations to also find literature which combines internal
Corporate Venturing and Corporate Effectuation and critical reviews on the effectual
principles and applications. Key words were: Corporate Entrepreneurship, strategic
entrepreneurship, firm performance, entrepreneurial behaviour, entrepreneurial
attitude, Effectuation, causation, entrepreneurial decision making, start-up
performance, prediction, control, (+internal) corporate venturing, employee
innovation, uncertainty (+ large companies), new market creation, and opportunity
creation, Effectuation conditions.
2.1.2 Literature Analysis
The literature analysis is conducted in a first selection (relevance) and second
analysis step (value) (Saunders et al, 2012: 108).
The first selection step was mainly based on different criteria which qualified a paper
as general relevant. Selection criteria are:
Date of publication: not older than year 2000 as newer research includes the
latest findings (only applicable for Effectuation literature) and builds upon
older research. But also dependant on the research intensity of the topic and
breakthrough explorations, research before year 2000 was selected;
Ranking: of the publishing journal: A+, B, C were selected using the
VHBJourqual3 of the German Academic Association for Business Research
(vhbonline, 2016)
Authors: known in the research field and cited, mainly used in assessing
Effectuation literature;
Abstract: relevant topic and/ or research question, useful theory, useful
results, similar or contrary findings or theories;
Key words: see chapter literature collection 2.1.1;
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References and citations: relevant references and cited in other scientific
papers (Saunders et al, 2012: 108).
As the literature on Effectuation, especially on corporate Effectuation, its application
and framework conditions for the application is limited, those criteria were only a
guideline for the literature selection. For corporate entrepreneurship literature, those
criteria were fully applied as quite a lot of literature was available.
Second, the literature was analysed by reading the selected articles, evaluating the
value of the paper: methodological approach, reliability and validity of results,
conclusions, biases (Saunders et al., 2012: 108). Finally, relevant parts of the article
were summarized and filed into possibly relevant literature review chapters of this
study. Additional to the critical review of the articles and to also include already
stated critical aspects about the research topic, the relevant articles were scanned for
critical comments and were then critically considered.
2.2 Challenges in Managing Innovations
“Innovation is the process of engaging in behaviours designed to generate and
implement new ideas, processes, products and services, regardless of the ultimate
success of these new phenomena” (Unsworth, 2003:3) including both idea generation
(creativity) and idea implementation (Unsworth, 2001:294). Managing innovation in
corporations is challenging starting with the questions of “What has to be managed”
(Bessant, 2003:761) focusing on innovation processes of opportunity and potential
innovation search, selection, resource allocation and implementation (Bessant, 2003;
Tidd and Bessant 2009). The next challenge in managing innovation is the questions
of “Why change” (Bessant, 2003:762) meaning the continuously change in
technologies, processes and products in order to keep pace with fast developing
markets and increased competitive pressure. However, “What to change” (Bessant,
2003:762) emphasises the importance of an innovation portfolio and the awareness
of different innovation possibilities and positioning (2003:762). Next, Bessant (2003)
states the challenge of understanding innovation in terms of different views on
innovation for example seeing innovation as R&D capability, technology advance or
meeting customer needs (Bessant, 2003:764) influencing the outcome of the
innovations. Building company specific innovation routines characterizes the
challenge of building an innovation culture (Bessant, 2003:763). Those routines are
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for examples routines in continuous search for innovation (recognizing), matching
innovations with strategic goals (aligning), and the ability to develop innovation
through resource access (generating) (Bessant, 2003:765). The next challenge -
continuous learning - focuses on routines facing the environment of innovation, for
example “cross-functional team working” (2003:765) and “early involvement of all
relevant functions” (2003:765). The challenge “high involvement innovation”
(Bessant, 2003:766) states that innovation cannot be separated from the operational
level but need creative problem solving (2003:766). Also ambidexterity and
managing discontinuity is a challenge in managing innovation meaning that there
need to be a balance between exploring new products and processes and exploiting
existing ones. Lastly, a challenge of innovation is eliminating firm isolation and
enhance cooperation activities with other firms to share knowledge and develop ideas
cooperatively (Bessant, 2003:770).
Summarizing, firms are facing several challenges in managing innovation resulting
in difficulties to set up an innovation framework in the company and not fully
exploited innovative ideas. However, those challenges in managing innovation can
also be decreased with the implementation of entrepreneurial processes as well as
thinking and acting.
2.3 Corporate Entrepreneurship
This chapter approaches corporate Entrepreneurship especially entrepreneurial
processes in order to embed and lead to the main topic of corporate Effectuation.
Corporate Entrepreneurship is an entrepreneurial process that contributes to
“promoting and sustaining corporate competiveness” (Covin and Miles, 1998:47).
Several researchers have stated the positively related influence of corporate
entrepreneurship on firm performance and company survival especially in
competitive environments (Miller, 1983; Lumpkin and Dess, 1996; Dess, Lumpkin
and McGee, 1999). “Rather, virtually all organizations—new start-ups, major
corporations, and alliances among global partners´—are striving to exploit product-
market opportunities through innovative and proactive behaviour” (Lumpkin and
McGee, 1999:85). Summarized by Kuratko (2010), for several reasons, firms have
started to implement entrepreneurial processes and entrepreneurial behaviour in order
to enhance innovativeness (Baden-Fuller, 1995), profitability (Vozikis et al., 1999)
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and strategic renewal (Guth & Ginsberg, 1990). As a main characteristic, corporate
entrepreneurship can be divided in two domains: corporate venturing, which is the
“adding of new business […] to the corporation” (Kuratko, 2010: 130) and strategic
entrepreneurship, which means “the exhibition of large scale or highly consequential
innovation” (Kuratko, 2010:130) in order to gain competitive advantage. The main
difference between those domains is how profitable growth is generated by a
company, namely by adding new business (corporate venturing) or by strategical
efforts of innovation to gain competitive advantage. Corporate Venturing on the one
hand, can appear in three different ways: internal corporate venturing, cooperative
corporate venturing, and external corporate venturing (Kuratko, 2010:130). Internal
corporate venturing indicates that the company still owns the internal created
business for the purpose of entering a new market or the development of a product
which differs to the existing products (Kuratko, 2010; Robert and Berry, 1985).
External corporate venturing means the investment or acquisition of an external
created venture in order to complement existing products or services or diversify in
other markets. Lastly, cooperative corporate venturing is the collaborative
development of a business which is shared with one or more other companies in
cooperation (Kuratko, 2010: 131).
Contrary, the second domain of corporate entrepreneurship, strategic
entrepreneurship, does not necessarily include the creation of new business but
concentrates on the exploitation of the current competitive advantage and
simultaneously on the exploration of innovation for future competitive advantage
(Ireland and Webb, 2007:15). Especially in strategic entrepreneurship, innovations
are emphasised which are for example changes in products, strategy, organizational
structure, processes, or capabilities (Kuratko, 2010:134). Those are closely linked to
the strategical direction towards competitive advantage of the firm and can include
several entrepreneurial initiatives and opportunity and advantage seeking behaviour
(Ireland, Hitt and Sirmon, 2003:963; Kuratko, 2010:134). The transformational
performance of a company by strategic entrepreneurship especially innovation can be
seen from the internal (internal transformation related to products and services) and
the external point of view (transformation relative to industry competitors) (Kuratko,
2010:134). Strategic Entrepreneurship can for example take the following shapes:
strategic renewal (redefinition of relation to market and competitors and how to
compete), sustained regeneration (regularly introduction of new products or regularly
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entering new markets), domain redefinition (diversification in other than the current
product or service domain), organizational rejuvenation (changes in processes,
structures, capabilities) (Kuratko, 2010: 132; Covin and Miles, 1999; Covin and
Miles, 2007; Ireland and Webb, 2007).
The following Figure 1 shows a model of a corporate entrepreneurship context
developed by Kuratko (2010).
Figure 1 A model of corporate entrepreneurship context (Kuratko, 2010: 130).
The model of corporate entrepreneurship context of Kuratko (2010) is a
representation of relations and conditions within corporate entrepreneurship and is
adapted from current research and finding from literature on corporate
entrepreneurship.
Factors triggering transformational change are depicted besides others with intense
competition resulting in the need of a sustainable competitive advantage, rapid
technology change and shorter product life cycles resulting in a shorter time frame
for the exploitation of current competitive advantages. After corporate
entrepreneurship is triggered, the management will decide on the execution of a
corporate entrepreneurship strategy in terms of corporate venturing and/ or strategic
entrepreneurship which was already explained above. Next, specific organizational
factors are needed to pursue corporate entrepreneurship. Those can be regarded on
three organizational levels: top management, middle management and operational
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management. Within those management levels, specific factors enhances the
implementation of the corporate entrepreneurship strategy and entrepreneurial
behaviour. For top management those factors are: decision discretion (tolerating
failure, delegating authority), entrepreneurial mind set, organizational culture, and
effective governance mechanisms. For the middle management, those influencing
factors are the following: support from top management, available time, work
discretion/ autonomy, effective reinforcements (Kuratko, 1990; Hornsby et al., 1999;
Hornsby, 2002). Third, on the operational management level antecedents are for
example entrepreneurial trainings, organizational culture and team building skills.
Resulting from those factors in action, entrepreneurial behaviour can be created
within the three management levels if the organizational antecedents are also
perceived by employees. The entrepreneurial behaviour is the action of corporate
entrepreneurship resulting in for example ratifying, recognizing and directing (top
management), championing, synthesizing, facilitating, and implementing (middle
management), and experiencing, adjusting, and confirming (operating management).
Resulting from this entrepreneurial behaviour, outcomes and consequences can be
divided in managerial and organizational outcomes. Managerial Outcomes and
effective entrepreneurial behaviour is the contribution to strategy implementation,
enhancement of skill set, salary increases, stronger link to core competencies and
promotions whereas ineffective entrepreneurial behaviour is training and
development of people and insufficient contribution to strategy implementation.
Organizational outcomes result in strategic renewal, effective strategic adaption,
increase in organizational knowledge, and more innovative behaviour beside others.
Summarizing, corporate entrepreneurship contributes to competitive advantage
(Covin and Miles, 1998:47) and firm performance (Miller, 1983; Lumpkin and Dess,
1996; Dess, Lumpkin and McGee, 1999). In addition, the entrepreneurial context
depicted by Kuratko (2010) shows the relationship between transformational
triggers, corporate entrepreneurship strategy, organizational antecedents, the related
entrepreneurial behaviour and resulting entrepreneurial outcomes and consequences
on managerial and organizational level.
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2.4 Causation and Effectuation
After focusing on corporate entrepreneurship literature, this thesis now emphasises
entrepreneurial acting as part of corporate entrepreneurship focusing on the two main
logics for entrepreneurial acting Causation and Effectuation (Sarasvathy, 2001a).
Furthermore entrepreneurial processes are described in order to integrate
entrepreneurial acting.
Entrepreneurial processes are “all the functions, activities, and actions associated
with perceiving opportunities and creating organizations to pursue them (Bygrave,
2004:7). Describing a dynamic model of entrepreneurial processes, Sarasvathy
(2010) focuses on the visible and learnable elements of entrepreneurial behaviours
(Moroz and Hindle, 2011:804). Especially expert entrepreneurs who are
characterized by effectual behaviour, are seen as being able to create opportunities
and create new ventures and new markets (Sarasvathy, 2001). The following chapter
focuses on Effectuation as entrepreneurial behaviour enhancing competitive
advantage and firm performance. In order to define and explain the effectual logic
precisely, Effectuation is compared with the complementary but contrary causal
logic.
“Causation processes take a particular effect as given and focus on selecting between
means to create that effect” (Sarasvathy, 2001a: 245) meaning that the entrepreneur
aims to achieve a specific pre-defined goal. Opposed to that, the “Effectuation
processes take a set of means as given and focus on selecting between possible
effects that can be created with that set of means” (Sarasvathy, 2001a: 245). Within
the effectual logic the goal is not pre-defined but variable and flexible according to
given means available for the entrepreneur. The chef metaphor of Sarasvathy (2001a:
245) illustrates the difference: A chef in the kitchen on the one hand can cook a meal
by following a recipe, look for the ingredients needed, buy them and cook the ditch.
On the other hand, the chef could look which utensils and ingredients he has
available in the kitchen, decide for a menu and cook it. This process reflects
Effectuation as the chef acts and thinks depending on available means and resources.
The first process is a more causal approach because the chef acts and thinks goal-
oriented because he has the goal to cook one specific meal for which he needs
specific ingredients. In fact this example neglects several characteristics of Causation
14
and Effectuation as the chef is neither interacting with other chefs or guests nor
considering contingencies during cooking or any other dynamism (Sarasvathy,
2001a: 245). Nevertheless, it shows the main characteristic of thinking and acting
goal- (Causation) and mean- (Effectuation) oriented.
The following Table 1 Comparison of Causation and Effectuation (adapted from
Kraaijenbrink, 2008: 3) shows the five main differences between the two
complementary logics which are explained in detail below.
Dimension
Causation model
Effectuation model
Starting Point Ends are given Means are given
Assumptions on
future
Predictability means
controllability
Controllability reduces need to
predict
Predisposition
towards risk
Expected return Affordable loss
Appropriate for Existing products and markets New products and markets
Attitude towards the
unexpected
Avoidance of the unexpected Use of contingencies
Attitude toward
outside firms
Competition Cooperation
Type of model Linear Cyclical
Table 1 Comparison of Causation and Effectuation (adapted from Kraaijenbrink,
2008: 3)
Ends versus Means
As the cooking metaphor indicates, the effectual thinking and acting Entrepreneur
first thinks of the existing means he already has available and decides for actions on
the basis of variable goals which can be achieved with those pre-set means.
Causation on the other hand emphasizes the pre-set goal as starting point and the
selection of needed resources in order to achieve that specific goal. Only if the
entrepreneur has well defined the specific goal he is able to determine the means
necessary to achieve this goal. The following Figure 2 Goal Orientation versus Mean
Orientation illustrates the difference between the two logics.
15
Figure 2 Goal Orientation versus Mean Orientation (Sarasvathy, 2001b:3)
Thus, the central point in the Effectuation theory is the Entrepreneurs “initial
position” (Blekman, 2011: 42) and “three categories of “means”: they know who
they are, what they know, and whom they know – their own traits, tastes, and
abilities; the knowledge corridors they are in; and the social networks they are part
of” (Sarasvathy, 2001a: 250). The first mean describes the character of the
Entrepreneur, its identity, values, preferences and its culture. To know who one is
brings great advantage in the situation of uncertainty and benefits as basis of decision
making on the individual level (Faschingbauer, 2010: 39). On the firm level, given
means are for example human, physical and organisational resources; on the
economical level given means are beside others technologies and demographics
(Sarasvathy, 2001a: 250). The second mean - what an entrepreneur knows - describes
the subjective knowledge of the actor for example education, professional career,
problem solving activities, success and experiences during the own life as well as
physical health (Faschingbauer, 2010: 41). Those circumstances influence how the
entrepreneur thinks, decides and which way he will go. Third, given means depend
on whom the entrepreneur knows, his own network including proponents, opponents,
potential clients or guests and suppliers who´s feedback influence the decision
making process as the entrepreneur depends on other opinions and behaviour in a
network world.
Prediction versus Control
The second characteristic and difference between the two logics is the assumption on
the predictability of the future. Causal thinking entrepreneurs assume a certain
16
predictability of the future while analysing opportunities in a specific market,
segmenting the market and planning marketing activities (Barich and Kotler, 1991).
Whereas effectual thinking entrepreneurs do not predict an uncertain future but try to
control it (Sarasvathy, 2001a: 252). Hence, the focus of Effectuation lies in those
aspects which are controllable because the entrepreneur does not need to predict
them. By implication, Effectuation is most fruitful in an uncertain environment with
high controllability and low predictability (Kraaijenbrink, 2008: 4) which can be
classified in the following Figure 3 Framework of Prediction and Control (Wiltbank
et al., 2006: 983) as non-predicative control and transformative approach which is
explained below.
Figure 3 Framework of Prediction and Control (Wiltbank et al., 2006: 983)
Figure 3 Framework of Prediction and Control (Wiltbank et al., 2006: 983) shows the
different dimensions of prediction and control in a matrix. On the one hand, with a
low emphasis on control, studies on strategic management divide future perspectives
in planning and learning schools (Brews and Hunt, 1999: 891-892) where the
planning school is based on goals followed by needed means and the learning school
as a more adaptive approach where goals and means are linked. In both approaches
the firm put the emphasis on positioning with a low emphasis on control and a high
emphasis on prediction based on an exogenous environment (Mintzberg and Waters,
17
1985: 259). Thus, firms with a low control approach put its emphasis on positioning
in the existing market.
On the other hand, with a high emphasis on control, construction centres the “means
– ends relationship” (Wiltbank, 2006: 989): the firm views the environment more
endogenous rather than exogenous. Prediction plays a minor role when it comes to
controlling the future as “To the extent that we can control the future, we do not need
to predict it” (Sarasvathy, 2009: 91). Control is to “directly working to create and
influence the evolution of market elements” (Wiltbank et al., 2006: 987). The
visionary quadrant is characterized by high control and high prediction meaning that
the firm and its environment is based on visions of future possibilities and the
actively implementation (Wiltbank et al., 2006: 990). The transformative approach,
emphasizing low prediction and high control, represents the logic of Effectuation
which can be characterized as “action-oriented, inter-subjective, and non-
predictively” (Wiltbank et al., 2006: 991) converting existing firm resources into new
goals. Sarasvathy (2009) named this non-predictive control “Pilot-in-the-pane”
(p.91) because the effectual thinking and acting entrepreneur is his own pilot
constructing the future based on own experiences and resources and not as someone
driven and influenced by another pilot (exogenous environment and market
dependency).
Expected return versus Affordable loss
The next characteristic and difference between Causation and Effectuation is the
view on risk. The goal of a causal thinking entrepreneur is the maximization of return
and the pre-calculation of needed investments in order to start-up the venture.
Contrary, the goal of the effectual thinking entrepreneur is to assess the worst-case
loss as affordable (Chandler et al, 2011: 377) unless the loss is affordable the
entrepreneur is not taking the risk (see Figure 4 Expected return versus Affordable
loss (Faschingbauer, 2010: 52).
18
Figure 4 Expected return versus Affordable loss (Faschingbauer, 2010: 52)
Figure 4 Expected return versus Affordable loss (Faschingbauer, 2010: 52) reveals
the outside-in perspective of the causal logic as the external environment of risks and
opportunities are given; this is most suitable in a stable and predictable environment
in order to choose the best alternative (Faschingbauer, 2010: 52). The effectual logic
is a more inside-out approach because the entrepreneurs’ decision depends on the
individual (network-) evaluation of the importance and value of the possible result
and loss in case of failure.
Sarasvathy underlines the focus “on experimenting with as many strategies as
possible with the given limited means” (2001a: 252) in order to construct many
possible alternatives for the future rather than limit oneself for expected returns.
Hence, effectual lead start-ups are seen as experiments only investing on the basis of
reasonable results and with inherent losses (Chandler et al, 2011: 380).
Especially towards affordable loss literature is questioning this characteristic of
Effectuation it could also be possible that an entrepreneur acts goal-oriented but only
invest what he can afford to lose or vice versa that a mean-oriented entrepreneur
possibly intent to maximize future returns (Kraaijenbrink, 2008: 4). Furthermore,
literature has revealed that the affordable loss principle probably has no significant
impact on venture performance (Read et al, 2009: 538). This aspect will be further
discussed in Chapter 5.
Existing products and markets versus new products and markets
The next difference between Causation and Effectuation is the mind-set towards
existing and new markets. As mentioned above, the causal logic concentrates on
analysing markets and plan how to increase return in the best position on the market.
Thus, Causation focuses on existing markets concentrating on either existing
19
products (market penetration) or new products (product development) (Ansoff,
1965). Whereas Effectuation concentrates on the creation of new markets
(Sarasvathy and Dew, 2005: 543) and he so-called suicide quadrant as here the
entrepreneur has two uncertain factors: one is the uncertainty about the new market
and the second uncertainty is the new product which are both not known at all.
Figure 5 Suicide Quadrant of Effectuation (Sarasvathy, 2001b: 7)
In literature this clear distinction is also criticized because an entrepreneur could
possibly also act effectual in an existing market while experimenting and interacting
with others in order to create new products and benefiting from existing means and
resources (Kraaijenbrink, 2008: 5). Thus, Kraaijenbrink summarizes that the
effectual principles could also possibly be applied in existing markets and product
(2008: 5). Additionally, new markets and products could also be developed through
market and customer behaviour analysis (Causation) and create revolutionary
changes (ibid).
Figure 6 Contrasting the textbook (causal) model of marketing with effectuation
(Sarasvathy, 2008: 39) below illustrates the reversal causal logic based on first
segmentation, targeting, and positioning on a market whereas the effectual logic is
based on stakeholder identification through available means and resources,
stakeholder definition through partnerships and the final definition of possible
markets (Sarasvathy, 2008: 38).
20
Figure 6 Contrasting the textbook (causal) model of marketing with effectuation
(Sarasvathy, 2008: 39)
Avoidance of the unexpected versus usage of contingencies
Causation and Effectuation differ also in the attitude towards the unexpected: the
causal approach here focuses on minimizing and avoiding the unexpected and trying
to reach the goal despite of unforeseen contingencies (Sarasvathy, 2008: 89). On the
opposite, the effectual approach uses contingencies in order to develop the venture
and to see those as opportunities which can be leveraged and used to control (2008:
90). Sarasvathy argues that not the contingency itself is the advantage but the
entrepreneurs’ effort to leverage it (2008: 91).
Competition versus Cooperation
Next, Causation and Effectuation differ in the attitude to the outside environment of
the firm. In the causal approach firms compete, benchmark and put effort in
competitive analysis in order to evaluate others competitive advantage, unique
selling propositions and strategies. Contrary, the effectual approach focuses on
21
cooperation and pre-commitments from different stakeholders to reduce uncertainty
(Sarasvathy, 2008: 88). Therefore, effectual thinking entrepreneurs strive to find
stakeholders (potential customers, employees, suppliers, investors, and people with
complement means etc.) which actively take part in shaping the venture after
committing to it (2008: 88). The created external and internal partnerships reduce
uncertainty while adding new means and resources which has a positive significant
impact on venture performance (Read et al., 2009: 538) whereas reviewers point out
the disadvantages of cooperation as shared returns and profits and potential in
sharing intellectual property in later stages (Kraaijenbrink, 2008: 6).
Linear versus Cyclical
Lastly, Sarasvathy (2001a) distinguishes Causation and Effectuation in its “context
of relevance” (p.251): the causal process is applicable in static, linear, and
independent environments whereas effectual processes assume a dynamic, non-
linear, and ecological environment. Distinguishing entrepreneurs in novices and
expert, Sarasvathy describes a way of how expert entrepreneurs act and emphasizes
the “change based nature of entrepreneurship by considering the difference between
parts of the entrepreneurial process “(Moroz and Hindle, 2011:804).
Figure 7 Dynamic model of Effectuation (Sarasvathy, 2008: 101) summarizes in an
illustration on the one hand all above mentioned aspects of Effectuation (means,
control, affordable loss, new products and markets, contingencies, cooperation) and
on the other hand emphasis the dynamic character of Effectuation.
22
Figure 7 Dynamic model of Effectuation (Sarasvathy, 2008: 101)
Summarized, the effectual thinking entrepreneur follows an inside-out approach first
taking into account which means and resources he has already available (means) and
thinks of possible actions with an input which the entrepreneur can afford to lose
(affordable loss). Then, the entrepreneur accesses his own network and tries to find
stakeholders who pre-commit to the possible venture (cooperation) and add new
means and resources and possibly new goals on the basis of commitment (control)
and use of contingencies (contingencies). Resulting in a cycle (cyclical), new
markets are possible to be created (new market creation).
The distinction between the linear causal and the cyclical effectual logic is also
discussed and criticized in literature as it may be too simple to say that all causal
process are linear as it could be an iterative process as well. Furthermore, the means
– oriented Effectuation process is not per se cyclical (Kraaijenbrink, 2008: 6) as this
depends on the characteristic of contingencies and partnerships.
23
2.5 The Application of corporate Effectuation
In this sub-chapter, the application of corporate Effectuation is examined stating the
five core principles of Effectuation in a corporate and start-up context and
summarizing recent research on corporate Effectuation.
Five core principles of Effectuation
The bird in hand principle reflects the means-orientation of a person. Projects,
especially R&D projects, in established companies are mostly goal-oriented
(Blekman, 2011:146) because an internal set-up project most of the time aims at a
specific goal with specific budget allocations and project plan. Within the effectual
logic, employees on the one hand know their own characteristics and preferences,
know their own knowledge and capabilities and connect to their own network.
Next, the Affordable loss principle reflects the acceptable risk a person can adopt. In
corporations, the employee is embedded in a company not actively facing losses of
this company, meaning that if an employee has an idea asking the company for
budget to implement it, there are no monetary losses to be accepted for the employee
but a loss of reputation. In ventures on the other hand, it´s the entrepreneurs´ shares
and reputation that could be lost by failure. Thus, only investing, not only
monetarily, what the entrepreneurs can afford to lose is even more essential in
ventures as it possibly means surviving. In a corporate context, the employee is
evadable safe from losses.
Next, the lemonade principle reflects using contingencies for further development of
an idea (Blekman, 2011:150). In a corporate context, uncertainties and contingencies
are mostly tried to be reduces as the goal might not be reached under different
circumstances than assumed. An entrepreneur on the other hand can use
contingencies to further develop the idea into a profitable business idea.
The crazy quilt principle is characterized by a pre-commitment of stakeholders to the
idea and the associated additional means. In a corporate context partnerships are
common on different levels for example using open innovation and project
collaboration for developing or supporting ideas and projects. For ventures, the
network is important to get feedback on the idea and to get a certain pre-commitment
in order to gain means and resources and to develop the idea further.
24
Lastly, the pilot in the plane principle characterises the emphasis on control rather
than prediction to shape an uncertain future. As already discussed above, many
established companies are used to try to predict the future with market and customer
analysis. But trying to create a completely new market within an existing large firm
is rather rare. For expert entrepreneurs, controlling the future is, beside the other four
principles, the key to success (Sarasvathy, 2001).
Recent literature on corporate Effectuation
In literature corporate Effectuation is only little researched.
Wiltbank et al. (2006) involved as one of the first researchers Effectuation in a
corporate context discussing decision making with a high emphasis on control rather
than prediction (2006:984).
Next, da Costa and Brettel (2011) researched employee Effectuation based on
individual and organizational factors influencing the entrepreneurial behaviour of the
employee. The authors found a positive relationship between pro-activeness and a
high appreciation of unexpected events as the only significant relationship for the
effectual logic within the individual factors (pro-activeness, personal persistence,
internal locus of control). Furthermore, they found a positive relationship between
higher top management support and a higher means-orientation as well as a higher
appreciation of unexpected events in the organisational factors (work discretion, time
availability, management support. rewards and reinforcement) (2011:559-560).
Blekman (2011) extended Effectuation to a corporate context describing and
analysing practical examples of companies applying Effectuation like Starbucks,
Virgin Galactic and Rabo Bank. Furthermore, he developed a corporate Effectuation
mind-set examining organizational components relevant for corporate Effectuation
for example: top management support, organizational structure, people development,
integration in the operational processes and information systems. Blekman also put
emphasis on business modelling (more flexibility), reframing (centring the user of a
product) and personal development (learning of Effectuation) in a corporate context
(2011).
Next, Brettel et. al. (2012) researched the impact of entrepreneurial action on R&D
project performance. The study investigated Effectuation and Causation dependent
on the degree of innovativeness as driver for uncertainty. A positive relationship was
found between the application of Effectuation – means, affordable loss, partnerships,
and acknowledge the unexpected- and project success - process output and process
25
efficiency - in the context of high innovative projects. However, there could no
relationship been found between means-driven R&D projects and its positive impact
on high innovative degree R&D projects and its process output and as well as its
negative impact on low innovative R&D project and process efficiency (2012:171)
which leaves space for discussion.
Johansson and McKelvie (2012) studied the role of human capital and the
organizational environment in applying Effectuation and Causation for developing
new opportunities (2012:1). Concerning human capital the authors only found a
positive relationship between a position in top management and Causation,
affordable loss, flexibility, and experimentation but not related to pre-commitment
(2012:5). Regarding the organisational environment, both entrepreneurial culture and
reputational capital (attractiveness to investors, customers, suppliers and employees
(2012:6)) were found as positively related to the use of Effectuation (2012:9).
2.6 Conditions for the application of Effectuation in a corporate
context
Conditions on how to implement Effectuation in a corporate context is barely
researched (Johansson and McKelvie, 2012:1). This chapter summarizes the
literature based and proved conditions of Effectuation in a corporate context. Those
can be divided in two categories: Organisational and Human Capital factors (da
Costa and Brettel, 2011; Johansson and McKelvie, 2012). Figure 8 illustrates and
summarizes literature based conditions of corporate Effectuation allocated to the two
categories. Three of the conditions match for both categories as they are of relevance
for the organization itself and human capital. Those three are: reward and
recognition, people development and top management support which are further
described and explained below.
26
Figure 8 Framework Conditions for implementing Effectuation in a corporate context
(adapted from Morris and Kuratko, 2008; Johansson and McKelvie, 2012; da Costa
and Brettel, 2011; Grichnik et al., 2010; Blekman, 2011; Sarasvathy, 2001a)
Organizational Culture
The organizational environment of the firm is represented by goals, attitudes and
assumptions that are also connected to the decision making of corporate individuals
(Simon, 1997). Thus, regarding Effectuation and decision making under uncertainty,
environmental factors have to be considered as influencing factor (Johansson and
McKelvie, 2012:5).
The first main organizational factor is the organizational culture which is a set of
shared cognitive means, values, belief, norms and assumptions (Sackmann, 1991).
An organizational culture is shaped by historical and present developments and can
only be influenced in the long-run (Grichnik et al., 2010:372). Furthermore,
employees problem solving and decision making is influenced by the organizational
culture as basic assumptions learned and proved during problem solving are possibly
taught to new employees as best practice (Schein, 2004:17). Entrepreneurial culture
27
as a form of organizational culture “offers an environment characterized by creativity
and openness, which constitutes a good breeding ground for effectual logic”
(Johansson and McKelvie, 2012:6). Thus, a higher entrepreneurial culture is
positively related to the use of the effectual logic (Johansson and McKelvie, 2012:6).
Part of the organizational culture also encompasses failure treatment towards
employee mistakes (Grichnik, 2010). A fair evaluation of project goals which could
not have been reached by the employee influence the entrepreneurial employee
initiative as failure has a positive impact on the learning curve (Grichnik, 2010:374).
Many companies. A not-acceptance of failure results in a demotivation and fear of
failure for the employee. For implementing the effectual logic, a positive failure
treatment is important as Effectuation encompasses experimenting with certain
means and resources.
Experimenting also means trial and fail until it works. In an organization with a low
acceptance of failure, for example in companies adapting lean management,
experimenting and failure is not part of the companies´ culture (Grichnik et al.,
2010:374).
The organizational culture is also closely related to top management support. If also
the middle management is aware of desired entrepreneurial action they can support
employees towards entrepreneurial behaviour for example with access to resources,
available time, recognition in budget allocation and autonomy in resource allocation
(Grichnik, 2010:374). Those aspects are relevant for an entrepreneurial culture and
the application of Effectuation (da Costa and Brettel, 2011). Da Costa and Brettel
(2011) found out a positive relationship between top management support and
means-orientation supporting the importance of top management support (559).
However, they could not find a positive relationship between a strong reward and
reinforcement system and a strong focuses on expected returns (2011:560). This does
not imply a negative relationship between reward and the application of Effectuation
why it is an included factor in this study.
Organizational Structure
The second main organizational factor - organizational structure – considers the fact
of an adequate organisational structure with communication channels and a control
system (Grichnik, 2010:371).
28
The number of hierarchical levels and the resulting flexibility (higher level of
hierarchical levels means a lower flexibility) influence employee initiatives. Slevin
and Covin (1990) stated a relationship between management style (entrepreneurial
and conservative) and the organisational structure (mechanistic and organic) whereas
an organic organisational structure and an entrepreneurial management style
enhance an effective, entrepreneurial organisation. This means that an organisation
facing a dynamic environment should deploy a flexible and entrepreneurial thinking
management style in order to be successful (Grichnik, 2010:371). By implication, the
resulting structure should be flexible and organic as well and should allow corporate
members to meet without hierarchical limitations (Blekman, 2011:191). In addition,
the resulting flexible and diverse corporate processes where innovations are not seen
as a responsibility of R&D but of all departments, corporate Effectuation has a
chance to be implemented (Blekman, 2011:194).
Human Capital
As the basis of Effectuation research is the decision making process of expert
entrepreneurs (Sarasvathy, 2001a), individual traits of employees and expertise play
an important role as conditional factor. Individual traits of employees are reflected in
the five core principles of Effectuation which were discussed in chapter 3.3. Besides
those influencing factors, several more individual factors influence the
implementation of corporate Effectuation. Those are first, the education of the
employee. Johansson and McKelvie (2012) found a positive relationship between a
high level of education and the use of the causal logic which is further discussed in
chapter 7. Furthermore, Johansson and McKelvie (2012) proved the positive
relationship between a position in top management and the use of the effectual logic
(2012:5).
The next human capital factor is pro-activeness tested by da Costa and Brettel (2011)
and described as individual anticipation of future opportunities (ibid). They found a
positive relationship between high personal pro-activeness and a higher appreciation
of unexpected events (2011:4) which supports experimenting and the use of
contingencies in the effectual logic.
Lastly, the individual attitude and capabilities characterize a corporate Entrepreneur
(Grichnik, 2010:366). Mainly the attitude towards having an influence on
compositions within the organisation and the conviction that an employee has the
ability to control the future have an impact on an entrepreneurial mind set (Grichnik
29
et al., 2010:366). Summarizing, the following tables shows the stated factors and the
related literature:
Main Factor Factor Literature
Organizational Culture Horsnby et al., 1999
Failure Treatment Ireland and Webb, 2007
Project Evaluation Ireland and Webb, 2007
Experimentation Ireland and Webb, 2007; Sarasvathy,
2001a; Johansson and McKelvie, 2012
Top Management SupportKuratko et al., 1990; Hornsby et al., 2002;
daCosta and Brettel, 2012
Organizational Structure Kuratko et al. 1990
Number of Hierarchical Levels Johansson and McKelvie, 2012
Organic Management Style Ireland and Webb, 2007
FlexibilityIreland and Webb, 2007, Johansson and
McKelvie, 2012
Effectual Factors
Means-driven Sarasvathy, 2001a
Controllability Sarasvathy, 2001a; Arend, 2015
Risk Assumption
Ireland and Webb, 2007; Sarasvathy,
2001a; Moroz and Hindle, 2011; Kuratko,
1990
Use of contingencies Sarasvathy, 2001a
CooperationIreland and Webb, 2007; Sarasvathy,
2001a
Other Factors
High level of Education Johansson and McKelvie, 2012
Position in Top Management Johansson and McKelvie, 2012
Proactiveness daCosta and Brettel, 2012
Individual Attitude daCosta and Brettel, 2012
Capabilities daCosta and Brettel, 2012
Table 2 Literature Overview
30
3 Methodology
The goal of this thesis is to explain framework conditions for implementing
Effectuation in a corporate context and raise a theoretical framework as this is
missing in the latest Effectuation literature (Eisenhardt and Graebner, 2007: 26).
Therefore, this study is a qualitative explanatory study with the goal of answering the
research question and developing a theoretical framework.
3.1 Research Design
The research design is influenced by the underlying research philosophy having an
impact on the researchers´ understanding of knowledge (Johnson and Clark, 2006)
and on how to develop and characterize knowledge (Saunders, 2012:127). The
underlying philosophy of the researcher in this thesis is realism as the focus here lies
on explaining within the context of the space company and the interaction between
the researcher and the interviewee (Saunders, 2012).
The research design of this study is summarized in the following table which is
further explained in the below chapters.
Philosophy Realism
Data Collection Qualitative research: Semi-structured interviews and short
questionnaire
Strategy Embedded case study
Sample 15 employees from a space company working different innovation
and non-innovation related departments
Time Horizon Cross-sectional
Data Analysis Template analysis in atlas.ti
Table 3 Research Design of this thesis
3.1.1 Data Collection and Strategy
This research is primarily a qualitative approach with quantitative research whereas
the qualitative data is the primary source of data and the quantitative data has a
support function. This approach is common in case studies to collect and analyse
data (Yin, 2009). A case study is chosen in order to enable a good understanding of
the context of the research (Eisenhardt and Graebner, 2007) and to answer the stated
research question asking a “what?” questions in a sufficient way (Yin, 2009).
31
Furthermore, qualitative data generated in 15 interviews is supported by quantitative
data generated by a questionnaire with 12 questions and 4 possible answers each. A
qualitative approach with the support of quantitative data is chosen for this study
because of the following reasons (Brymann, 2006: 106; Creswell and Plano Clark,
2007; Molina-Azorin, 2010):
Explanation: the quantitative data of the questionnaire helps explaining the
findings of the interview data as the interviewees evaluation in the PAVE test
and the resulting preferred PAVE strategy indicated the subjective view on
the adaption of Effectuation in the company and deliberated conditions for
implementing Effectuation to enhance entrepreneurial processes and
innovation,
Understanding: better understanding of complex research phenomena of
framework conditions for the implementation of corporate Effectuation in a
corporate context,
Credibility: enhanced integrity because qualitative data is supported by
quantitative results,
Diversity: greater diversity of views on the research,
Offset: offset of the weaknesses of both methods and draw on the strength of
both.
Qualitative data: Interviews
The interviews are conducted in a semi-structured approach to generate a wide range
of data input and to enable the interviewee to think freely, independently and to
develop an own collection of thoughts and answers for the asked interview questions.
For the interview questions see Appendix A.
The interview questions were developed based on the current literature of corporate
entrepreneurship, strategic entrepreneurship and Effectuation. The questionnaire is
divided into three parts:
1. Personally identified challenges with innovation and innovation initiatives
within the firm,
2. Application of Effectuation in innovation on the personal, employee, and
company level,
3. Conditions for implementing corporate Effectuation in this company.
32
Generally, the questions were asked openly to encourage the interviewee to think
freely and start speaking freely. Getting started, a short introduction of the topic is
given and the interviewee is asked about his experiences with innovation initiatives
and personally identified issues with it. Second, participants are induced to think
about their own experiences with Effectuation and the application of Effectuation on
the personal level, employee level and company level. This part is designed openly
as the interviewee needs some time to think of the possibly new topic of
Effectuation, its principles and their own perspective. In order to support the
interviewee, the logic of Effectuation and its´ principles is shown during the whole
interview. In the case the interviewee does not understand single aspects of the
principles, those are explained again. Third and after being fully into the topic,
interviewees are asked to think of circumstances and conditions they can imagine to
act effectual and what should be changed to enable effectual behavior on different
levels. As this is the most demanding part, the interviewees are first asked open-
ended questions and if necessary are getting support by key points of the literature in
order to enable the interviewee to think in different dimensions and circumstances of
Effectuation, which was for most of the interviewees a completely new logic. The
key points were developed based on the literature and the researchers´ assumption
based on his experience in the company. For the open question for framework
conditions those key points were: top Management support, flexible processes,
separate organizational structure, access to resources, capabilities, tools,
development of peoples´ skills, attitude, knowledge, recognition, reward, failure
treatment For organizational and personal conditions those key points were based on
the four core principles of Effectuation: budget allocation, partner acquisition, use of
existing resources, and flexibility of goals. To sum up, the participants has the
opportunity to give further comments on the discussed topic.
Based on the newness of corporate Effectuation, possible requests on participants´
answers and to ensure that interviewees deliberate the questions, a face-to-face
interview was conducted taking approximately 30 to 45 minutes. All interviews
followed this semi-structure, were electronically recorded and were conducted within
7 weeks. Every participant signed the declaration of consent (see Appendix B) before
the interview, ensuring confidentiality, an anonymous analysis of data and the record
of the interview. Additionally, before the interview, every participant was again
33
informed that the interview will be recorded. After the interview, the records were
checked and transcribed.
Quantitative data: Questionnaire
The questionnaire (see Appendix D) is called PAVE test and was developed by
Faschingbauer (2016). The test is based on the PAVE strategies: prediction,
adaption, vision, and Effectuation describing the preferred strategy in decision
making and problem solving (Faschingbauer, 2016) (see Figure 3). Before using this
test Faschingbauer was asked for permission of using the test in this study via email.
After confirmation, Faschingbauer also sent more information on the test, the method
how to do the test and the analysis method which is explained in the chapter Data
Analysis below.
10 points per question had to be distributed. Thus, one answer can be weighted from
0 to 10 points while a higher score means a higher accordance to the person). 10
points can also be distributed to one single answer (Faschingbauer, 2016).
The questionnaire was sent to every participant prior to the interview via email to
ensure on the one hand an independent and on the other hand from the interviewer
and the interview questions unaffected completion of the questionnaire. However,
nine participants completed the questionnaire right before the interview and six
participants completed the questionnaire prior to the interview. Although the
interviewer did not interrupt during completion and the pure fact of attendance of the
interviewer could have possibly biased the results.
3.1.2 Sample and Time Horizon
The participants of the study were employees from a space company from different
departments within the company in order to get as much data as possible for this
qualitative research within the limited time frame of this thesis. Therefore, a cross-
sectional study was chosen in order to meet the time requirements of the thesis. 17
interviews were conducted whereas only 15 interviews were analyzed as emerging
during the interview, two participants rejected to answer around 80% of the relevant
questions. The number of interviews was determined by recurring answers and
stagnating new data input for the research.
34
Participants for the interview were selected as follows:
First, and as Space System with its 15.000 employees is a huge network of potential
participants, those were narrowed down with the help of the researchers´ network
within the company and several recommendations of potential participants from
innovation initiatives, as well as second tier recommendations meaning that several
recommended potentials gave recommendations on potential valuable interviewees
in the innovation field. This snowball sampling is among others effective in a field
where potential participants are likely to know each other (Vogt, 2011:368).
Especially in the innovation environment of the space company this is the case as
influencers and experts know each other because of complementary departments or
conferences. The most valuable result of the snowball sampling was that especially a
wide range of contributors was hard to find as the company has many innovation
initiatives with several contributors. Resulting, the snowball sampling was valuable
to get access to a wide range of participants. Additionally, participants had to fulfill
the requirements that they either are or were involved in an innovation initiative or
are influencing innovation within the space company because of their position or
expert role. Five potential participants were eliminated before the second step
because they did not match with one of the mentioned requirements. With the help of
the snow ball sampling and the mentioned requirements, a list of potential
participants of 20 employees was created
Second, all potential participants got an email asking for the participation in the
research and containing the research topic, research question and design, as well as a
short introduction to corporate Effectuation and its potential benefits for the
company, and the declaration of consent. After one week, an email was sent in order
to remind potential participants.
Third, after three weeks, the selection was completed by the status of participation.
Two potentials were not available, one employee rejected because of time issues and
17 employees confirmed to take part in the study. Two interviews were not
considered in the analysis as they refused to answer around 80% of the questions and
the remaining answers were no new data input. In total, 15 participants took part in
this study.
35
The role of the interviewees ranged from project managers (nine interviewees),
program managers (four interviewees) to contributors (five interviewees) whereas
three interviewees carry out two different roles being a project manager and a
contributor.
The name of the department was generalized as well in order to keep the participants
anonymously and to make sure that an interviewee cannot be identified because of
logical combining of role and department. Thus, departments vary between Business
Development (five interviews), R&T/ R&D: Research and Technology and/ or
Research and Development (four interviews) and different projects (six interviews).
Business development and R&T/ R&D can be roughly seen as Innovation
departments while the department projects are non-innovation related engineering
projects. Within the project departments, the interviewees engage or engaged in
innovation, strategic entrepreneurship, and idea generation. The distribution of 9:6
Innovation related and project departments should deliver reasonable results in
analysis because it can be assumed that those interviewees participating in innovation
initiatives (contributors) and those who influence an innovation initiative (initiator
and expert) have different points of view on the application of Effectuation and
framework conditions in order to implement corporate Effectuation in the company.
Thus, the final participants can be assigned in three groups.
I: Influencer with a high impact on the design and implementation of
innovation and entrepreneurial processes within the company,
E: Experts from R&T and innovation, and
C: Contributors to innovation and entrepreneurial processes, who primarily
took part in one of the space companies´ innovation initiative.
36
Table 4 shows an overview about the employees who participated in the interviews.
Interviewee Role of Interviewee Department I1 E2 C3
1 Project Manager Business Development x x
2 Project Manager Business Development x
3 Project Manager + Contributor Project x
4 Program Manager Project x x
5 Project Manager R&T/ R&D x x x
6 Project Manager R&T/ R&D x x
7 Project Manager R&T/ R&D x x
8 Contributor Project x
9 Contributor Business Development x x
10 Project Manager + Contributor Project x
11 Program Manager R&T/ R&D x x
12 Project Manager + Contributor Project x
13 Program Manager Business Development x x
14 Project Manager Business Development x x
15 Program Manager Project x
Table 4 Interview participants list
Five participants were working in business development, six participants were
working in different engineering projects, and four participants were employed in
research and technology and/ or research and development. Three participants had a
position as program manager meaning that they were either head of a department or
leading more than one project. Nine interviewees were project managers leading one
specific project, six people were took part in an innovation initiative whereas three of
them were also a project manager and one participants was also a program manager.
Finally, the interviews were conducted with 11 male and four female employees
which could possibly cause a gender bias in the analysis.
1 Group: Influencer (I)
2 Group: Expert (E)
3 Group: Contributor (C)
37
3.1.3 Data Analysis
In the post-interview phase data was analyzed for each type of data separately.
Afterwards, the results were compared with each other.
Qualitative Data: Interview
The challenge in analyzing qualitative data is on the one hand to interpret words
which can imply multiple and unclear meanings and on the other hand to explain,
analyze, synthesize and transform a mass of electronic files (Saunders et al.,
2012:546). Therefore, template analysis is used as it is a “more flexible technique
with fewer specified procedures, permitting researchers to tailor it to match their own
requirements” (King, 2012: 428). As proposed by Lewins and Silver (2009)
CAQDAS 4 , especially the qualitative data analysis software Atlas.ti is used to
conduct template analysis.
Next, the technique of template analysis is described based on the research and
analysis of King (2012) and Saunders (2012):
First and before starting the interviews, codes based on the literature are grouped in
codes with higher- and lower order constituting the initial template (see Appendix F).
“Coding is the process of attaching a label (code) to a section of text to index it as
relating to a theme” (King, 2012:431). Therefore, the initial template was divided in
three main groups: challenges in innovation, application of Effectuation, and
condition for corporate Effectuation. The first group challenges in innovation was
created based on the researchers´ experiences with innovation initiatives of the
company. The second group application of Effectuation, reflects the five core
principles of the effectual logic based on the research of Sarasvathy (2001). The third
group, conditions for corporate Effectuation, was dived in two main groups based on
the literature: organizational factors and human capital factors. Furthermore, the
organizational factors were divided into the organizational culture and the
organizational structure again separated into sub factors of this group. The human
capital factor was also split into two sub groups: effectual and other factors
separating the effectual logic from other influencing human capital factors.
4 Computer Assisted/Aided Qualitative Data Analysis Software
38
Second, the initial template was revised after conducting the first five interviews.
Codes with no matches were eliminated whereas frequently occurring new codes
were added to the template. After every fifth interview the template was revised
again resulting in one initial template and three revisions. Even a change of hierarchy
of a code, a completely new introduction of a code or even the elimination of a code
is possible in this adaption process. A code was eliminated when only one
participants quoted ones on this code. This was conducted during the whole template
analysis. In the second and third revision, extra loops to prior revision steps were
implemented in order to validate the implications of new codes. Resulting, prior
interviews are double checked for new codes.
Third and after collecting and analyzing all data carefully, the template was used as
an analytical basis and revised again for the conceptual framework in order to
explain key conditions and relationships in the data.
Figure 9 illustrates the described template analysis and the process to a conceptual
framework for this research.
39
Figure 9 Template Analysis for this research (based on King, 2012)
The analysis of the final template was done as follows:
First, in atlas.ti seven code families were generated according to their corresponding
main factor. Code families are characterized by only one sub level factor. The code
families are: challenges in innovation, application of Effectuation, organizational
culture, organizational structure, effectual factors, other factors, and innovation
factors. Super family codes were then generated in order to allocate specific code
families to a higher level of family. Super code families are characterized by two sub
levels factors. The two code families, organizational culture and organizational
structures were allocated to a super family code named organizational factors. The
same was done for the code families effectual factors and other factors named human
40
capital factors. The two super family codes and the family code innovation factors
were finally allocated to conditions for corporate Effectuation as head family. This
relation is shown below in Figure 10.
Figure 10 Code Family Structure
Green: Family Code,
Red: Super Family,
Blue: Head Family.
41
Quantitative Data: Questionnaire
As already stated, the questionnaire has a support function in the complex qualitative
data analysis. Thus, the quantitative data analysis concentrates on valuable analysis
supporting qualitative data with PAVE distributions and frequencies in order to be
able to discuss the resulting framework conditions of the interviews. The researcher
disregards especially, beside others, distributions and frequencies of single answers
and significance tests. Thus, the quantitative analysis is not a complete quantitative
analysis.
The questionnaire was analyzed primarily using the proposed analysis method from
Faschingbauer as he used exploratory data analysis and a coding scheme allocating
every answer to one of the four PAVE strategies in different chronological order.
For analysis purpose, the distributed points ranging from 0 to 10 were counted and
summed per strategy. Afterwards, groups of strategies were formed in order to
classify the answers along the dimensions of prediction and control (see Figure 11
below for color code):
P+A: low emphasis on control,
V+E: high emphasis on control,
P+V: high emphasis on prediction,
A+E: low emphasis on prediction.
Afterwards, the preferred strategy was analyzed comparing those groups based on
the degree of emphasis on prediction and control to analyze the groups along the
dimensions of prediction and control:
(P+V) > (A+E): more prediction preference than non-prediction,
(P+V) < (A+E): more non-prediction preference than prediction,
(P+V) = (A+E): equal preference for prediction and non-prediction
(P+A) > (V+E): higher emphasis on control
Figure 11 shows the dimensional context of those groups in the PAVE matrix.
42
Figure 11 PAVE strategies (adapted from Wiltbank et al., 2006: 983)
The goal of this data is to support the qualitative interview data, to be a discussion
point for answering the research question and to deliver possible reasoning for
qualitative data. Thus, the analysis of the quantitative data is limited to useful and
valuable analysis towards the support function. Therefore, the results are analyzed
regarding highest and lowest values, distributions (strategy and groups) and
frequencies. Additionally, results are shown in suitable distributions graphs and
tables.
Support of quantitative data to qualitative data
The goal of the comparison is to prove and evaluate given answers on subjective
points of view on the application of Effectuation on the individual and company level
and the stated framework conditions for the implementation of corporate
Effectuation in the company. The results of the interview data and simple data
analysis of the questionnaire were therefore compared on the individual level and on
the company level. On the individual level, the results were compared on regard of
accordance of answers in the interview and preferred strategy resulting from the
questionnaire. On the employee level as a unit, individual information were
condensed and compared regarding accordance of the units´ point of view on the
43
application of Effectuation and framework conditions. The support function is used
in the discussion chapter.
3.2 Ethical Considerations
This explanatory case study places high value on ethical considerations and standards
because of the companies´ emphasis on Innovation, new innovative initiatives and
the strong internal effort to optimize and re-organize innovative processes of the
firm. Ethical standards were set over all research sub-phases especially regarding
participant protection, data protection, and responsibility for data analysis and
reporting (Saunders et al. 2012: 208 - 257; Cooper and Schindler, 2006: 112 – 133):
This includes the carefully designed research with regard to potential harm and
conflicting interests within the department and the whole company in terms of an
informal risk assessment and conflicting interests.
Furthermore, the disclosure of the research purpose and design in the pre-interview
phase with all relevant information was revealed to all participants that they were
able to learn about the research, the purpose and decide whether or not to participate
in the research itself. After the selection of potential interviewees, a short
introduction of the research topic was sent to the group of participants via email.
Sending it via email allowed the potential participants to think about the decision
privately and without external influence of the researcher or the corresponding
department within the company. This guaranteed a voluntary basis of all
interviewees and the clarification of general questions beforehand. Lastly, the
interviewees signed a declaration of consent to ensure data protection and
confidentiality of the collected data (see Appendix B and Appendix C)
During the interview phase, the interviewees were prevented from coercion by
respecting right to withdraw and the researchers´ objectivity during the whole
interview phase by concentrating on the relevant interview questions, the time, the
relaxed atmosphere and trying to minimize emotions. Additionally, participants
answers were treated confidential and anonymously.
In the post-interview phase, data was treated confidentially, anonymously, and
objectively. Furthermore, the agreed consent on data usage and protection was
considered. Finally and all over the research phase, physical and mental harm for
participants and researcher was avoided (Saunders et al., 2012:236).
44
4 Results and Discussion
The collected qualitative and quantitative data is analysed according to the
methodological approach in chapter 3.1.3. In addition, the presentation of the results
of the template analysis is done using an account structure around the main factors
stating interview citations to illustrate the context (King, 2012:446).
This chapter is structured according to the literature review and the corresponding
interview sections. First, an overview about the sample of the study and their division
into the three groups: initiator, expert, and contributor is given. Second, the identified
challenges in entrepreneurial processes and innovation are analysed in general and
depending on the group placement. Third, the analysis of the application of
Effectuation in the corporate context follows structured in a general analysis
approach and group comparison. After the simple quantitative analysis of the PAVE
questionnaire in order to support and discuss the purpose of the qualitative results,
fifth, framework conditions for the application of corporate Effectuation follows
according to organizational factors, human capital factors and innovation factors.
Finally, this chapter discusses the stated results on company specific innovation and
corporate entrepreneurship challenges, the application of corporate Effectuation and
the explained company specific conditions on applying Effectuation in the corporate
context of a space company after each section. The results are furthermore compared
with the existing literature in the field of corporate Entrepreneurship and corporate
Effectuation. Comparing the results with existing literature, the aim is to evaluate
and to support the results but aims not to find a generalizable approach. In addition,
results are explained and considered critically.
4.1 Participants and Group Comparison
As stated above in chapter 3.1.2 the sample of 15 participants, with a middle age of
41 years, are allocated in three different groups: initiators, experts, and contributors.
Initiators are employees within or very close to innovation initiatives designing and
managing innovation in the company. Experts are employees who have expertise
trough their deep experiences within innovation in and outside the company and who
influence innovation and entrepreneurial processes in the company in different ways.
Contributors are mainly engineers from projects who take or took part in an
innovation initiative and who are seen by the company and the corresponding
45
department as innovative regarding both, technical and business innovation as well
as process innovation. A participant can be classified in one or more group. Table 5
summarizes the groups and the number and characters of the sample.
Table 5 Group Analysis (adapted from King, 2012:434)
The sample consists of 11 males and four female participants which possibly cause a
gender bias. Only one of the interviewees is part of all three groups. The reason for
that lies in his age, work and innovation experience and past contribution to
innovation initiatives and idea development. Five employees are classified as both
initiator and expert as these two groups are related to each other because being an
expert results mainly from inside or outside positions within and deep experiences
with entrepreneurial processes, strategic entrepreneurship and innovation. Two
participants are both expert and contributor and one participant is initiator as well as
contributor. The number of participants of the last combination is only small because
the sample indicates that it is unusual to on the one hand have a position in
innovation and on the other hand contribute with an innovative idea in an initiative.
Six people are classified only in one groups, mainly as contributor whereas one of
them is exclusively an expert.
Analysing the groups, seven participants can be classified as initiators. Six of them
are male and one of them is a female participant. The approximately age range is
between 35 and 57. One person participated from a project department two from
business development and four persons from R&T and/ or R&D as those
Groups of
Participants
Number of
Participants
Characters of
Participants
Initiators
7
1 female, 6 male Approx. age range: 35 – 57 Departments: 1 projects, 2 business development, 4 R&T/ R&D
Experts
9
3 female, 6 male Approx. age range: 26 – 57 Departments: 0 projects, 5 business development, 4 R&T/ R&D
Contributor
9
2 female, 7 male Approx. age range: 26 – 59 Departments: 6 projects, 2 business development, 1 R&T/ R&D
46
departments are influencing innovation initiatives and idea and technology
development.
The next group consists of three female and six male experts, overall nine persons.
Those are aged between 26 and 57 and are positioned in mainly business
development (five participants) and R&D/ R&T (four participants). None of the
experts are currently working for a specific engineering project.
The third group – contributors - encompasses nine participants with an approximate
age range of 26 to 59. Two female and seven male participants are working for
specific engineering projects (six people), business development (two people), and
R&D/ R&T (1 person).
4.2 Challenges in Strategic Entrepreneurship and Innovation
Results
The main purpose of this section is to detect existing challenges in innovation and
strategic entrepreneurship in order to analyse and discuss the application of
Effectuation as well the framework conditions for the application of corporate
Effectuation.
Starting the interviews, the initial template consisted of the challenges: inflexible
processes, budget allocation and demotivation based on the researchers´ experiences.
After the first five interviews, seven additional factors were added to the factor
challenges as they were mentioned at least once. These challenges were: lack of
vision, risk aversion, no access to resources, no freedom to innovate, coordination of
processes, no flexible organisational structure, and the cost factor,. Separate factors
were opened as the new identified challenged did not fit to the existing three factors.
After the next five interviews and for the second template, three codes were
eliminated again as those were not mentioned anymore and had still only one quote:
no access to resources, no freedom to innovate, and the cost factor. However, four
codes were added to the template as they were mentioned at least once in the second
interview group: reactiveness, age structure, no feedback, and workload. For the third
template and after the final five interviews, no codes were added but two more
eliminated as they were not stated in the final five interviews and remained with one
quote: no feedback ad workload. For the final template, nine codes for challenges
remained in the template.
47
In the final template, two of the three pre-existing challenges from the initial
template were emphasised by the sample, which are demotivation and budget
allocation with each six quotes in the sample. The factor demotivation is primarily
characterized by employees who are discouraged to generate, develop or hand in
ideas because of time restrictions, personal workload or a complicated and not clear
idea and innovation handling within the company. Furthermore, ideas get rejected by
top management for further development because of some unknown reason. If the
idea is implemented by another company or entity several years later, the
demotivation of employees rises:
“[…] we are conservative we miss things. And for me and other people I
know ideas are rejected for what seems for reasonable reasons and then one
or two years later a competitor does it with huge success. And that is really
frustrating” (Interviewee 9, code: demotivation).
The factor budget allocation centralizes corporate investment difficulties. The
problem here is that the company would like to plan its budget allocation to
innovative projects even before they exist. However, innovative ideas emerge or
deliberate but cannot be planned exactly and without deviations. Thus, the exact
budget allocation of future ideas is rather difficult. In addition, especially in the high
tech industry of space the technical development has the potential to generate high
costs which has to be covered by the company. This trade-off between idea support
and budget is described in this factor:
The company wanted to know which innovative projects we could possibly
submit one year in advance in order to plan the budget. This kind of budget
allocation has nothing to do with reasonable innovation and short term
developments of strategies, technologies, new ideas. It is completely
incompatible5 (Interviewee 3, code: budget allocation).
As third most mentioned challenge, the lack of vision was emphasised by the sample
with five quotes from four different participants. Lac of vision means that employees
5 Translated from German, for original quote see Appendix K Interview Translations: original quotes
48
are not sure about the direction of the company and therefore feel unsecure in
submitting ideas because they do not know if this applies to the companies’ vision:
“Let´s say […] [the market] used to be a lot more stable than it is now.
Because there is a real lack of vision in big programs and internationally in
what people are doing next.” (Interviewee 9, code: lack of vision).
Next, the factor inflexible processes mainly concentrates on rigid and impenetrable
processes defined for innovation within the company. If an employee has an idea, it
is common within the company that this persons also develops the idea. But
sometimes they do not want to develop it further because of time pressure or
workload or any other reason but would still like to submit it because it may be a
valuable idea. In addition, there are too many innovation processes within the
company impenetrable for employees:
“I think this is arriving at the destination. So that positive and good. I think
right now we are in the definition phase of the processes so basically what we
have and this is the difficulty for an innovation manager basically what we
have is a lot of Innovation opportunity a lot of Innovation process”
(Interviewee 13, code: inflexible processes).
Another challenge in the company concerning innovation was named risk aversion.
This means that the company fears taking over risks especially financially and
resource based. The use of resources like machines or expert knowledge for an idea
which possibly will not survive is cost intense. The risk that resources are blocked
where it could have been used for more beneficial idea or project is a challenge for
innovation:
The fear of taking over risks [is a big problem], using own means and
resources. They hope to get investors taking over those risks.6 (Interviewee
11, code: risk aversion)
6 Translated from German, for original quote see Appendix K Interview Translations: original quotes
49
For employees, also the coordination of innovation processes is an issue. This
includes on the one hand the own developed processes of employees. Especially
encouraged and convinced employees submit the same idea in several initiatives over
and over again. In addition to that, they go own ways pitching ideas directly to the
top management. That is why several ideas exist over years and are over an over
pitched to different points of contact. On the other hand people are unsecure if a
submitted idea is exchanged between different innovation initiatives because this
could lead to the right initiative for a specific idea where it is best supported and
funded:
“And at my level sometimes I lack the understanding of how all these
[innovation processes] are coordinated. Or if they are somehow
coordinated” (Interviewee 13, code: coordination of processes).
Next, the factor no flexible structure emphasizes that the organizational structure of
the firm is under employees widely seen as construed for long term projects rather
than innovative projects resulting in an inflexible structure:
“I think it is because we traditionally kind of have the big long term project
we don’t have to steer the market in a quick way. It´s more a long term
lobbying and thing like that. And it is very conservative and risk averse. And
if you take the new business approaches like […] [company x] they are
doing, it scare a lot of people and they don’t know how to deal with that”
(Interviewee 9, code: no flexible structure).
The factor no reactiveness emphasizes the hazard that the company is too slow to
react on market trends and therefore does not match innovative ideas with market
trends:
“Second [internal innovation goal] should be to react on trends like […]
[company x] several years ago because they invented in a completely other
direction” (Interviewee 6, code: no reactiveness). .
50
The last factor tackles the age structure. This means that especially innovation
experts but also well experienced engineers have relatively high age in this company
which causes generation conflicts in the evaluation of ideas and the use of networks
in order to develop ideas:
“They are more experts and seniors and have a very different network what
the younger more innovative people might have. And therefore misjudge or
don’t understand potential new ideas” (Interviewee 9, code: age structure).
Overall, the eliminated challenge factors during template analysis were: no access to
resources, no freedom to innovate, costs, no feedback, and workload.
Considering the group comparison, particularly experts commented on challenges in
innovation in the company (24 total quotes) emphasising especially demotivation and
inflexible processes with total eight quotes. The contributors commented on each of
the remaining challenges especially on lack of vision and demotivation with five
quotes each. Noticeably, the group of initiators withhold with comments on
challenges in innovation with only eight quotes in total but emphasising the
inflexible processes.
“[…] we are not allowed to look for any new partner which would be of
interest for us and we have to take care because if we want to work with a
partner from […] [a country] we have to be aware of the national policy. It’s
a strong limitation for innovation” (Interviewee 4, code: inflexible
processes).
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Table 6 shows a summary of all challenges per group.
Challenges Initiator Expert Contributor
Inflexible Processes x x x
Budget Allocation x x
Demotivation x x
Lack of Vision x x
Risk Aversion x x
No Access to Resources
No Freedom to innovate
Coordination of
Processes
x x x
No flexible
organizational structure
Costs
No Reactiveness x x x
Age Structure x x
No Feedback
Workload
Table 6 Group of Challenges in Innovation
Discussion
Summarizing, the following company specific challenges were identified in this
study: inflexible processes, budget allocation, and demotivation, lack of vision, risk
adversity, coordination of processes, no flexible organizational structure, no
reactiveness, and the age structure.
Overall, the sample emphasized especially the challenges demotivation, budget
allocation and the lack of vision. An explanation for this could be the effort and the
goal of the company to innovate trying to set up several different innovation
initiatives which seem to be rather uncoordinated und inflexible in nature. In
corporate entrepreneurship literature, researchers suggest a “structuring [of] the
organization in ways that accommodate and reinforce the business ventures
embraced as part pf the firms´ strategic context” (Kuratko, 2010:142-143).
Furthermore, employees are not sure about the strategic direction of the company,
which results in a lack of vision and the employees´ uncertainty about what to
innovate and sense behind innovation. However, in the case employees are
encouraged to innovate and submit an innovative idea because they belief in it, they
52
seem to get demotivated by processes and budget allocation as it seem to be rather
hard to convince the management from a very early stage idea that need be
developed and researched. Therefore, especially in the space sector and for
technological innovation, a relatively high amount of money is needed for research
and development. For smaller technological ideas this may mean no budget
allocation and no chance for experimentation. In their intrapreneurship assessment
instrument, Kuratko, Montagno and Hornsby (1990) stated the support of smaller and
experimental projects as a factor of management support for intrapreneurship
(1990:56). However, for potentially bigger project, also a higher budget is required
which may causes a higher risk. In literature, the “encouragement for taking risks”
(Kuratko, Montagno and Hornsby, 1990:56) as a factor for management support is
stated. During analysis, the company seemed to be risk averse in innovation but
trying to collaborate with other companies to share risks. This seems to be a
reasonable approach as solution for reducing risk but also taking the challenge.
However, the perceived challenge of arbitrary budget allocation and risk aversion in
top management causes the demotivation of people.
4.3 Application of corporate Effectuation
Results
“Until some month ago, I did not know, that this effectuation has a name and
defined principles. But with friends I already applied this scheme completely”
(Interviewee 6).
The main purpose in this section is to detect and analyse existing effectual thinking
within the company in order to have a basic understanding of the current effectual
situation and a basis for later discussion on framework conditions for the application
of Effectuation in this company.
The initial template of the application of Effectuation in a corporate context was
based on the literature and the five core principles of Effectuation: bird in hand,
affordable loss, lemonade, crazy quilt, and pilot in the plane whereas the factor pilot
in the plane constitutes that a decision maker tries to control the future rather than
predict it in uncertain environments. In this section, codes could not be added but
only eliminated as the codes are based on the five core principles of Effectuation. In
the case that quotes were made fitting the effectual philosophy, those were allocated
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to one of the five principles where it was most applicable. After the first five
interviews, every factor was stated more than once. In the next two interview groups,
participants mentioned all of the principles especially bird in hand and crazy quilt. In
the final template, no codes were eliminated.
As already stated, the codes bird in hand and crazy quilt were the most frequent
identified principles of Effectuation within the company. Bird in hand was overall
quoted from 12 interviewees with a total quote of 18. Some participants talked about
innovative projects they were working on using and acting with resources available:
“The idea was to use our skills and knowledge in Astronaut training and
develop a system that could be used in Astronaut training” (Interviewee 10,
code: bird in hand).
Others participants were not taking part in an innovative project but were thinking
effectual in the way of the use of existing resources:
“So where you have resources organized normally per areas or program
areas or technical areas but organized by people that have similar
capabilities or similar orientation. And when you try to innovate you look at
your team and you say: ok and now what can this team do” (Interviewee 13,
code: bird in hand).
The crazy quilt principle was also quoted 18 times by 12 different interviewees.
Here, most of the interviewees referred to real engineering projects were cooperation
and additional resources and knowledge is inevitable for the project to succeed. One
of the participants commented on this more negatively intonating and as a necessity
rather than something desirable:
“Yes sometimes. When I am working with Subcontractors and we have to
manufacture new machines it’s very important to work together and to be
sure to succeed. We have an interest to succeed because we have
opportunities to gain money with it. Interestingly, we have a need and work
together and not in struggle” (Interviewee 12, code: crazy quilt).
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However, many participants were open minded towards partnerships and knowledge
sharing and were not only thinking but also acting effectual in the way of crazy quilt:
“And we worked together with this company and learned very much. And it
was the best result in my whole career because for me it was the biggest
scope” (Interviewee 15, code: crazy quilt).
The lemonade principle was mentioned with 11 quotes in the whole interview phase.
Here most of the interviewees emphasised their thinking but not their acting like the
lemonade principle. Unexpectedly, most of the participants were thinking of the
benefits of contingencies rather than seeing them as hindrances. However, one
participant used contingencies in a specific project in order to enhance the idea. The
result was ground breaking for the company:
From market experiences which we gained from customer interaction,
inherent in the whole activity and mutual discussions, a new modified way
arose. This ultimately led to the business we have started. A small
modification and a ground breaker for big business today […]7 (Interviewee
3, code: lemonade).
The last two principles affordable loss and pilot in the plane were both quoted nine
times each from six (affordable loss) and seven (pilot in the plane) different
interviewees. The reason for the relatively low number of quotes for affordable loss
is on the one hand that participants struggled with the understanding of this principle
and that the company is focuses on return on of investment as it is an economically
company. For that reason the number of appearing affordable loss cases is in fact
relatively high. Interviewee 4 from a specific high innovative and high technology
based project indicates the affordable loss principle in a corporate context in action:
7 Translated from German, for original quote see Appendix K Interview Translations: original quotes
55
“I have no limitations. I was given a very simple objective: to get this product
properly funded and to address whatever the market is as long as of course in
the end we make profit. One limit was given concerning the risks: one is the
product itself, second that the market itself is an emerging market
(Interviewee 4, code: affordable loss).
As this project of course faces several risks, the project manager and the company
decided to only spend what the company is able to lose and therefore tried to give
one of the risks to a committed stakeholder because they were not able to lose the
investments of both. This indicated also the principle of crazy quilt as this not only
means additional resources but also risk sharing.
“With these project, as soon as you have a risk sharing partner you are not
only sharing the risk off course but opportunities and mutual interests and
strategy, long and short term. Therefore we are doing co-creation”
(Interviewee 4, code: crazy quilt).
The pilot in the plane principle was mainly driven by thinking rather than acting.
However, the mind set of controlling the future rather than predicting it is shown in
the next quote:
The future is in your hands. You can control it but you really have to know it,
want it and boost it. Only you know the business, your personality, your
strength and weaknesses and which weaknesses to overcome. Only you know
your network with which you can reach your goals8 (Interviewee 3, code:
pilot in the plane).
Lastly, the results are analyzed according to their specific group.
41 quotes were given by participants belonging to the group contributor which is the
highest number of quotes in application of Effectuation within one group, followed
by experts with 32 quotes and initiators with 26 quotes. Overall, this was expected as
contributors are really acting within innovation initiatives and idea generation and
8 Translated from German, for original quote see Appendix K Interview Translations: original quotes
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therefore either think or act effectual in all dimensions of Effectuation emphasizing
crazy quilt and bird in hand.
However, experts of innovation are less thinking that they are the pilot in the plane
but are mainly using existing resources and corporations or think that this is the best
way to generate ideas and opportunities.
Initiator is the group with only three applied effectual dimensions: bird in hand,
affordable loss crazy quilt. During the interviewees, it was obvious that most of the
initiators do not feel controlling the future. Furthermore, from seven initiators only
two quotes were made concerning the use of contingencies and its seen benefits.
“Use surprises, if a chance comes up use it and go to that direction. Be brave
enough to walk outside pre-defined goals. Adapt goals to new goals”
(Interviewee 6, code: lemonade).
Summarizing, mostly project managers submitting and developing innovative ideas,
were identified to not only think but also act effectual. In the sample, there were
three innovative ideas which were developed and implemented effectually. Two of
the ideas are today big projects with several employees working on it. None of them
has break even yet. Regarding especially people involved in the innovation process,
some of them only think but not act in several effectual dimensions especially bird in
hand and crazy quilt. Within the expert group, the barrier between thinking and
acting effectual also seems to be high as some of them were thinking effectual but
not acting stating different identified challenges in innovation as reasons.
The below shown Table 7 summarizes the application of Effectuation within the
three group.
Application of
Effectuation
Initiator Expert Contributor
Bird in Hand x x x
Affordable Loss x x x
Lemonade x x
Crazy Quilt x x x
Pilot in the Plane x
Table 7 Group comparison for Application of Effectuation
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During the interview phase, it became obvious that especially in the analyzed
company there is a big difference between thinking and really acting effectual
meaning that many of the interviewed persons think effectual but either don’t know
how to act effectual or are hindered by several organizational circumstances like
processes, organizational structures, rules or personal hindrances like time pressure
and project workload.
First, also some participants neither think nor act effectual as they may are focused
on planning the future:
“However, I think we are concentrating more on what we can lose than what
we should invest. So it´s the opposite consideration. So in the past it was
more that […] [the engineers] have been alone with bringing the idea on the
next level cause yes it´s right they got money they got hours but they were
always supposed to get economically information” (Interviewee 7).
Second, most of the people thought effectual but did not act effectual primarily
because of company and cultural barriers:
“So I try to share and capitalize knowledge and try to make people taking
risks and develop their ideas. There are many barriers inside the companies
so I try to make people work on a plateau style. […]. But it would take time”
(Interviewee 14).
“The organizational structure is not built for that. You cannot take people
away from their service and department and take them to a plateau and make
them to work on something specific. That won’t work very well (Interviewee
14).
The third group consists of those persons thinking and acting effectual meaning that
they are not only thinking in a dynamical, resource based and partnership approach
but also act like this in their professional lives:
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“[…] we said what we have right now, what is missing. So we had an
extensive network to the outside and the money that we spent was mostly
spent outside of the company to get the solid scientific foundation for it or to
develop new technical equipment that is not available in house for example”
(Interviewee 5).
Lastly, the fourth group acting but not thinking effectual is not appearing in this
sample.
Discussion
The factors bird-in hand and crazy quilt were the most quoted factors in this study
whereas there seems to be a difference between effectual thinking and acting of
participants. Overall, participants quoted positively about the application of effectual
principles. Three participants said that they are or were actually trying to implement
a project under these principles but never knew that their kind of thinking and acting
approach has a name called Effectuation. On the one hand, this means, that not only
employees are thinking effectual but that also the company supports effectual
thinking in some projects. On the other hand, many participants were already
thinking effectual but did not know how to actually transform it in real actions
because of the challenges in strategic entrepreneurship and innovation stated above.
The factor lemonade was not only thought but also implemented as participants tried
to find support and suggestions on their idea within their internal and external
network. However, the least quoted factors affordable loss and pilot in the plane
differentiate from each other as the affordable loss principle was both little thought
and acted whereas the pilot in the plane principle was thought but not acted. The first
finding not thinking of what the company can afford to lose, may be caused in the
corporate context as employees do not own the budget they need for their own
projects. Caused by not thinking in affordable loss manners, this results in also not
acting according to this factor. The finding of thinking in pilot of the plane manners
but not acting in it is supported by quantitative analysis as 9 out of 15 participants
indicated in their answers that they prefer non-prediction over prediction (only 5 out
of 15 prefer prediction over non-prediction). This implied that employees in the
company have the mind-set to control the future and would like to shape it but are
not able to act in controlling sense because of cultural and structural constraints.
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Considering the group comparison, the interview revealed that experts were not
applying the pilot in the plane principle which possibly can be caused in their expert
and supporter role. In this sample, experts are more supporting and advising
innovation but not really acting. The pilot in the plane principle however means that
people think and act like they can control and shape the future. On the other hand,
the group comparison in quantitative analysis revealed that 5 out of 9 experts think
effectual. Experts possibly put some more emphasis on controlling the future in
answering the questionnaire than in really quoting controlling thinking and acting.
Contributors and initiators on the other hand focused more on the visionary approach
with 4 of 7 initiators (I) and 6 of 9 contributors (C). This possibly originates in the
passion for space inherent in the sample and the current trend on new technologies,
new markets and new applications of existing products. This result is not caused by a
precise company vision but an industry vision.
Overall, it can be said that the company much more thinks effectual than acting like
it. Beside affordable loss which is neither thought nor lived, and the lemonade and
pilot in the plane principle which are only thought but not implemented, it can be
said that the bird in hand and crazy quilt principles are implemented in some
innovative projects in the company.
4.4 The Extent of using Corporate Effectuation
In this section, the quantitative data collected from the PAVE test will be analysed in
a simplified way as this data aims at simply supporting the results from qualitative
analysis. This support is reached by analysing mainly the distribution of answers in
terms of planning (P), adapting (A), vision (V), and effectuating (E): PAVE. First,
the overall distribution of the four strategies is analysed. Afterwards, groups of
strategies (see chapter 3.1.3) are formed and distributions are shown in order to find
results in the dimension of prediction and control. Lastly, results are shown
according to groups.
Overall, 15 participants weighted 12 questions from 1 to 10 (the higher weight the
more applicable the answer) with four different answer opportunities each
representing one of the four strategies of decision making under uncertainty. With
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538 points from overall 1800 points allocated points, 9 out of 15 participants were
allocated to the effectual logic saying that the participants are using their own
resources and networks in order to create and develop ideas. 6 out of 15 participants
(507 points) gave their answers according to the vision approach indicating the
creation of ideas based on a clear vision of the future and actively shaping the future.
One participants (403 points) gave his answers according to the adaptive approach
meaning the active adaption to changing environmental circumstances. The least
points (52 points) were allocated to the planning approach (applicable for one person
who had the same amount of points for adaptive as for visionary approach) more
trying to predict the future rather than to control it and analysing markets and
positioning in the respective market. Graph 1 shows the corresponding distribution:
Graph 1 Distribution of Preferred Strategy according to number of participants
Adding those results in the PAVE groups in to order to evaluate the answers along
the dimensions of control and prediction, the following results are stated: the group
of V and E represents in total 11 of 15 participants, representing the group with the
most answers in sum. Thus, the group V + E depicts a high focus on control. Next,
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the group A + E represents 2 persons focusing on a low focus on prediction. One
person matches with the high focus on predication group P + V. Lastly and with a
low number of participants (one person), the group with low emphasis on control is P
+ A. Graph 2 illustrates this relation:
Graph 2 Distribution of PAVE groups according to number of participants
Comparing the groups with each other the following results are drawn:
9 out of 15 participants prefer non-prediction over prediction under uncertainty.
Prediction is preferred over non-prediction by 5 participants and for each one person
predication is as important as non-prediction or put a high emphasis on control
(Table 8). One person matched with two groups preferring prediction and
positioning.
Comparison of groups Description Result
(P+V) > (A+E) more prediction preference than non-
prediction
5 participants
(P+V) < (A+E) more non-prediction preference than
prediction
9 participants
(P+V) = (A+E) equal preference for prediction and non-
prediction
1 participant
(P+A) > (V+E) higher emphasis on control 1 participant
Table 8 Comparison of PAVE groups
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Regarding the results for the three groups initiator, expert, and contributor, 5 out of 9
experts indicated effectual logic thinking followed by visionary (3 out of 9) and
adaptive thinking (one out of 9). No expert preferred the planning approach. The
experts were the only group mostly answering the questions with effectual related
points. Both, initiators and contributors focused on visionary thinking with 4 out of 7
initiators and 6 out of 9 contributors. This is very surprising as especially the
contributors were expected to answer most of the questions with the effectual
answer. However, 4 out of 9 contributors did focus on effectual thinking as well as 5
out of 9 experts. The results from group comparison of the PAVE test are shown in
Table 9.
Strategy I E C
P 1 participant No participant 1 participant
A 1 participant 1 participant No participant
V 4 participants 3 participants 6 participants
E 2 participants 5 participants 4 participants
Table 9 Effectuation distribution according to group comparison
Summarizing, the results of the quantitative analysis can be seen as results of the
mind set of participants and how they deal with an uncertain environment. Those
results are valuable for the later discussion on the application of Effectuation in the
corporate context and conditions of applying corporate Effectuation.
4.5 Conditions of Implementing Corporate Effectuation
“Share and keep control” (Interviewee 6).
First, challenges of innovation within the company were identified to have a basic
understanding of those issue being possibly the reason for difficulties in applying
Effectuation in this corporate context. In addition, the status quo of the effectual
mind-set in the company was examined to find out if people think and act effectual.
The analysed challenges and the status quo of the application of Effectuation in the
company serve as discussion basis for company specific conditions in order to apply
Effectuation in the corporate context which are analysed in this chapter.
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The chapter is divided according to main influencing factors organizational factors,
human capital factors, and new developed innovation factor. In these sub-chapters,
the remaining condition factors are analysed.
4.5.1 Organizational Factors
Organizational Culture Results
The initial template in the organizational culture consisted of four different factors
developed from recent research on corporate Effectuation. Those were: failure
treatment, project evaluation, experimentation, and top management support. After
the first five interviews none of those factors were eliminated as were stated at least
once during the first interview phase. Three factors were additionally emphasized by
the sample and minimum quoted once: freedom to innovate, solidarity to the
company, and risk acceptance. These three factors were added to the first revised
template. After the following five interviews, project evaluation and risk acceptance
were eliminated again as those factors were not mentioned anymore. Again, no factor
was stated additionally to the existing once. During the last five interviews, solidarity
to the company was eliminated as there were only two quotes from the same person
stating that solidarity is very important in order to only invest what you can afford to
lose. Contradictory, one person from the last five interviews commented on solidarity
as well stating that the company has committed employees anyways as this is
inherent and common in the space industry anyways.
“There is a very positive trend to push people to innovate. And I think this is
good. I think everyone feels it. I feel it also myself” (Interviewee 13, reverse
code: solidarity to the company).
The final template resulted in four factors for organizational culture: failure
treatment, experimentation and top management support which were already stated
in the initial template, and the freedom to innovate, added during the interviews.
Overall, 44 quotes were made concerning the organizational culture whereas the
importance of top management support was highly emphasised by 10 participants
stating 22 quotes. Thus half of all quotes made for organizational culture were those
for top management support meaning the support of the head of department for idea
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generation and the allowance to participate in an innovation initiative. Next, top
management support means also the support from innovation initiatives in
developing the idea, access to budget and the idea push towards the top management.
Lastly, top management supports also indicates the open mind set of the top
management for crazy and/ or new ideas towards a new businesses. The last point is
linked to the hierarchical structure as both are often named in combination meaning
that top management support also means that even if the top management is many
hierarchical levels away from the level of the idea generator, the distance should be
reduced and should not result in idea refusal because of no open mind set.
“And very important for Innovation is you need to have channels to address
the top management directly. Why? To make sure that ideas are not stopped.
Or good ideas are not stopped. That good ideas have the chance to be heart
at the top management. Because often good ideas are linked with high
investment and only top management can decide on high investments and not
the middle management. Because it has more limited resources” (Interviewee
13, code: top management support).
Next, failure treatment was quoted 14 times also putting an emphasis on this
conditional factor for applying Effectuation in a corporate context. Failure treatment
encompasses the overall attitude towards failure keeping in mind that failure is
nothing bad but useful for learning and experiences and how not to do it:
“When you fail in the US system it doesn’t matter, they stand up, try again,
and fail again. In Europe if you fail once you are dead forever. Because you
never get the reputation of being an expert. Because you failed” (Interviewee
5, code: failure treatment).
The third factor - experimentation - was quoted 12 times from seven different
participants. This factors also emphasis an open minded organizational culture where
employees know that they are allowed to experiment with several ideas without
disadvantages for the personal career.
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“Because we are an aerospace company so as […] [company] we need to
have a high quality culture but on some areas of Innovation you need to try
and fail” (Interviewee 13, code: experimentation).
The fourth and last factor, freedom to innovate is the only factor added to the
literature based factors. This factor was stated six times from five different
interviewees. Freedom to innovate means on the one hand an open minded culture
with no internal barriers blocking idea generation and idea push towards business
generation and access to resources. On the other hand, freedom to innovate in this
company also means shared mind set towards a strategically direction but not being
blocked the inflexible directions.
“[…] give […] [the employees] more freedom. Companies with which we
benchmark like […] [company x] give every employee five thousand dollars a
year to promote an idea” (Interviewee 6, code: freedom to innovate).
The eliminated factors for organizational culture were: project evaluation, solidarity
to the company, and risk acceptance due to either to less quotes on those factors or
due to contradictory arguments (solidarity to the company).
Considering the groups, experts commented most on cultural aspects considering all
of the four factors with 38 quotes total but emphasizing top management support and
failure treatment. Initiators were quoting similar with 31 quotes in total, an emphasis
on top management support and failure treatment. However, they neglected freedom
to innovate with only limited number of quotes. The group contributors did not
contribute to organizational factors that much only commenting 22 times neglecting
the freedom to innovate and failure treatment. The group contributors emphasized
the importance of experimentation and top management support. Those results are
summarized in Table 10 Group comparison analysis for Organizational Culture.
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Organizational Culture Initiator Expert Contributor
Failure Treatment x x
Project Evaluation
Experimentation x x x
Top Management Support x x x
Freedom to innovate x
Solidarity to the company
Risk Acceptance
Table 10 Group comparison analysis for Organizational Culture
Organizational Culture Discussion
The remaining factors from template analysis for organizational culture were: failure
treatment, experimentation, top management support, and freedom to innovate.
Especially top management support was the most quotes condition for applying
Effectuation within the organization. This results can be proved by literature on
corporate entrepreneurship also stating the importance of top management support
for successful entrepreneurial behaviour, and its positive impact on entrepreneurial
action and subordinates´ satisfaction with the manager (Pearce et al., 1997:148;
Kuratko et al., 1990). In this study, the factor of top management support was
identified as the most quoted and most important one mentioned by all participants.
This is caused by the hierarchical structure of the company which also will be
discussed below. Employees and managers depend on the decisions of their superior
meaning that even if the operational management supports the idea this does not
necessarily mean that the upper or top management will support the idea too. The
current organizational culture is shaped by French and German cultural influences.
Where the German culture indicates a relatively low power distance, the French
culture is characterized by a high power distance. This means the French do more
accept the unequally distributed power and the hierarchical structure within the
company than the German (Hofstede, 1984:83-85). However, this fact influences the
top management support. In the sample only two participants were French, 13 were
German. However, as this is a multi-national company, French and German cultural
influences extend over the whole company independent from the site. The cultural
background of the top manager(s) may influence their support towards effectual
thinking and acting of employees.
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Related to top management support, failure treatment was the second most quoted
condition stated. Summarizing, for corporate effectual thinking and acting in this
company a change in failure treatment might be necessary as employees fear to fail
and in consequence lose their jobs and experiment concealed where possible
(Hornsby, 2002:258). But if experimentation and the acceptance of failure would be
supported the company could possibly gain valuable knowledge (means) from
employees as well as motivation for idea generation. Thus, experimentation and
failure treatment are related as experimentation means trial and fail and if fail is not
accepted, experimentation is not accepted. But experimentation in a limites way is
the key to reduce risks before fully supporting an idea (Markides, 1997:11).
Lastly, the factor freedom to innovate is also closely related to experimentation and
top management support because the freedom to innovate means on the one hand
time to innovate and the acceptance of idea generation and experimenting.
Surprisingly, in group comparison only two factors were confirmed by contributors:
experimentation and top management support. This confirmation is reasonable
because of the above stated reasons but failure treatment and freedom to innovate
were not mentioned sufficiently even though this group actively participated in
innovation initiatives but did not identify those conditions. The reason here could on
the one hand be the strong focus on top management support and experimentation as
those were the most important conditions for the application of Effectuation
neglecting the failure treatment and freedom to innovate. On the other hand,
contributors in the sample were innovative and entrepreneurial by personal nature as
all of them submitted several ideas to initiatives and three of the contributors had the
freedom to innovate either because of the freedom within their department or
because of the strategical importance of the innovative project they were working on.
Also initiators did not sufficiently mentioned all of the four remaining conditions of
organizational culture neglecting the freedom to innovate. This could be caused by
the position of the initiators and their organizational task to enhance and develop
innovate ideas within their initiatives. Initiators might not be aware that employees
would need a certain kind of freedom to innovate in order to be able to think and act
effectual.
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Organizational Structure Results
This section aims at finding the conditions regarding the organizational structure.
The initial template consisted of three factors raised from literature: number of
hierarchical levels, organic management style and flexibility. The first five
interviews revealed an additional factor called separate organizational structure. This
means a separate structure for innovation as well as for specific idea (strategic
entrepreneurship). In the next 10 interviews there was neither a factors eliminated
nor added to this code family finally resulting in four factors for organizational
structure.
Overall, 44 comments on the organizational structure were given regarding the four
factors. The factor flexibility in the structure was stated 21 times, so almost half of
all quotes which indicates the importance of that factor in order to apply
Effectuation. This factor especially included flexible processes within the company
as well as a certain degree of self-organization:
“I have no idea if […] [forbidding own processes and rules] could work
because of our centralized thinking. It should be self-organized, organic, not
French let’s say” (Interviewee 6, code: flexibility).
Next, the separate organizational structure factor was stated 16 times from eight
different interviewees including the desire of several participant to on the one hand
have a separate structure for innovation in general and for several internal ideas
leading to ventures in specific.
“At the time we implemented the project I spoke about we had a smaller
company, but already a […] [city] entity with decision making guys. But in
that smaller organization it was easier. So the less people involved the easier
it is” (Interviewee 15, code: separate organizational structure).
Next, the number of hierarchies was stated with eight quotes from six different study
participants. Here, participants focused on the reduction, minimization and
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overcoming of hierarchical levels in order to generate a structure enabling effectual
thinking.
“Hierarchical free communication and the Innovation process should be
classified” (Interviewee 6, code: number of hierarchical levels).
“Personally, you have to tap on individuals […] who bring forward the
process, not straight forward looking on an organigram (Interviewee 15,
code: number of hierarchical levels).
Lastly, the organic management style was stated only five times but all from
different interviewees. Here, the focus lies on a flexible management style were
managers adapt their style to different circumstances.
“[…] because […] [blocking the idea] is simply due to the fact that there are
differences how business is run in a French company and a German
company. So on the French side they used to get orders from the top and in
this case everything is preset you don’t need a company strategy”
(Interviewee 5, code: organic management style).
The group comparison revealed that the experts contributed the most for
organizational structure stating all of the four factors and emphasizing especially
flexibility and a separate organizational structure. However, contributors could not
comment that deeply on conditions for the organizational structure only stating 17
quotes with a low emphasis on flexible structures and a separate organizational
structure.
Initiators on the other hand, commented 36 times with a deep emphasis on again
flexible structures and a separate organizational structure. Table 11 shows the
summary of this group comparison.
Organizational Structure Initiator Expert Contributor
Number of hierarchical levels x x
Organic Management style x
Flexibility x x x
Separate organizational structure x x x
Table 11 Group comparison for Organizational Structure
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Organizational Structure Discussion
Concluding the organizational structure, the remaining factors were: number of
hierarchical structure, organic management style, flexibility and a separate
organizational structure. Flexibility focuses on flexible structures and self-
organization. This study revealed that specifically for this company a decentralized
form for Innovation and strategic entrepreneurship would enhance Effectuation in
innovation initiatives. “Decentralization provides autonomy to individuals and allows
the firm to effectively pursue a larger number of opportunities” (Ireland and Webb,
2007:55). This does not imply that a decentralized structure also enhances effectual
thinking of employees in project departments it selves. Furthermore, the need for an
organic management style was identified. In literature, this is called entrepreneurial
leadership (Ireland et al., 2003). Entrepreneurial leaders are able to “influence others
to manage resources strategically” (Ireland et al., 2003: 971).
Lastly, the number of hierarchical levels in the organizational structure was stated as
needed to be as small as possible. This is possibly caused by the wish of the
employees for a separate structure due to demotivation and many hierarchical levels
of this company but is not seen as a reliable condition for implementing corporate
Effectuation because hierarchies and management is actually the challenge of
corporate Entrepreneurship. With a very low number of hierarchical levels, this
would mean a smaller company or even a venture because the more employees an
organization has the more detailed is the hierarchical structure.
Considering the group comparison it was again surprising that contributors only
focused on flexibility and the separate organizational structure. Flexibility is caused
by the complex and invisible innovation structure of this company. The number of
hierarchical levels does not seem to be a condition for contributors for corporate
Effectuation in this company. This could be caused by the fact that many passionate
contributors go different ways in promoting their ideas than predefined ways.
However, experts identified all of the mentioned conditions because they well know
innovations and were able to give a lot of input to the organizational structure factor.
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4.5.2 Human Capital Factors
Effectual Factors Results
This section aims at exploring effectual human capital factors for an application of
corporate Effectuation in the company. It is distinctive to the family code application
of Effectuation as there the aim was to explain existing effectual structures whereas
in this section the aim is to explain conditional effectual factors in order to apply
Effectuation.
The initial template consisted of five factors: means-driven, controllability, risk
assumption, use of contingencies, and cooperation. During the whole interview
process none of those factors were eliminated and no factors were added to this code
family as on the one hand all factors were mentioned regularly and on the other hand
no additional factors were applicable here because the context is the effectual logic
with its basic assumptions.
Overall, 45 comments were made in this code family primarily focusing on
cooperation with 64% of all stated comments in this section (29 quotes) from nine
different interviewees:
“Bring people from the outside who are willing to share their experience.
People are really interested then and start building ideas when they exchange
ideas” (Interviewee 1, code: cooperation).
Next, the factor controllability also has a relatively high number of quotes with 10
quotes from nine different participants. This factor includes the controllability of idea
generation and development as well as the controllability if the market:
“And we have just to follow the market and not to plan” (Interviewee 12,
code: controllability).
The last three factors risk assumption, means-driven and use of contingencies have
almost the same low number of quotes (5, 4, and 3 quotes) which will be investigated
72
in the discussion section. Below the corresponding quotes demonstrating every factor
separately:
“[…] expect the risks involved and except that it is a different way of
working” (Interviewee 14, code: risk assumption).
“But also if it can use out existing knowledge and assets and money and in a
way we can make money” (Interviewee 9, code: means-driven).
“Because you get to know other opinions and recognize that you have to
change the idea and if environment changes you have to be agile (Interviewee
14, code: use of contingencies).
Concluding, in the template analysis of other factors, two factors were eliminated:
high level of education and position in top management as only one person quoting
ones for those factors were made for the eliminated ones.
Concerning the group comparison, it conspicuous that none of the groups put
emphasis on the factor means-driven. However, this factor remained in the final
template, as overall three participants strongly commented on this factor. Further
discussions on this factor follow in chapter 5. The experts stated 25 comments on
effectual factors focusing mainly on cooperation. The main focus on cooperation was
in all groups very strong. Comparing the number of comments on cooperation within
the groups with the number of all other factors in this code family, it is apparent that
the other factors only play a minor role in applying corporate Effectuation.
Effectual Factors Initiator Expert Contributor
Means-driven
Controllability x x x
Risk Assumption x x
Use of Contingencies
Cooperation x x x
Table 12 Group comparison for Effectual Factors
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Effectual Factors Discussion
The section of effectual factors aims at finding the perceived value for effectual
thinking in the company and the best adaption of effectual principles as maybe not
all of them should have to be implemented in this case.
All of the five dimensions of Effectuation were mentioned to be important for the
company to be implemented. Especially controllability and cooperation were seen as
the most important factors for the company. Cooperation was seen as very valuable
for the company because knowledge, resources and risks can be shared. Furthermore
the controllability was stated as the next desire for this company in order to apply
Effectuation because participants may see the company as predictive only adapting to
the market but not taking the risk and create an own market. Contrary, Arend et al.
(2015) argue that competition and other industry forces are not considered within the
effectual logical and that this might be difficult for the company as they act within a
competitive environment and that rivalry is specified insufficiently (2015:639). This
fact should also be considered in this company as space is an industry with strong
competition. Moroz and Hindle (2012) argue entrepreneurial processes can only be
purposive if a certain amount of planning is integrated (2012:806) meaning that the
effectual approach should not be seen as holistic and perfect approach matching to
every company but as something valuable for adaption and consideration. Therefore,
the planning approach won’t be eliminated but postponed to later stages of strategic
entrepreneurship.
Considering the mentioned risk assumption, this factor correlates with the factor
failure treatment and top management support from organizational factors and is also
a reasonable condition for implementing Effectuation as risk-taking also creates a
corporate entrepreneurial environment (Kuratko et al., 1990: 51).
The means-driven factor was not mentioned by any group sufficiently. Arend et al.
(2015) argues that assumption of means-driven restricts employees to only existing
resources but not prior to stakeholder commitment (2015:641). The here found study
result support the findings of Arend et al. (2015) because also in this company only
taking existing resources was insufficiently mentioned.
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Other Factors Results
This section aims at allocating all human capital factors beside the effectual factors
which are seen by the sample as necessary condition for the application of corporate
Effectuation.
The initial template consisted of five factors. High level of education, position in top
management, pro-activeness, individual attitude, and capabilities. After the first five
interviews, high level of education and position in top management were eliminated
as no participant commented on those factors. However, the factor reward was added
to the code family as no other factor could display the reward factor. After the last
five interviews, two factors were renamed: pro-activeness/ motivation and individual
attitude by open mind-set as this better displayed the content of the factor. The final
template consisted of four factors: pro-activeness/ motivation, capabilities, rewards,
and open mind-set.
Overall, 25 quotes were made in this code family focusing on the open mind-set
which was added after the first five interviews and continuously gained recognition
throughout the interview phase. The open mind-set comments primarily focused on
the individual attitude towards idea generation and participation in innovation
initiatives. Some participants stated that there need to be an open mind-set like the
ones from the Americans, not a European one (Interviewee 5, code: open mind-set).
“But first it needs people with open mind-set and who are able to have the
distance to internal processes” (Interviewee 6, code: open mind-set).
Next, pro-activeness/ motivation reached 19 comment from nine different persons
which also indicates a focus here. Pro-activeness mainly means the motivation of
people and can be distinguished from the factor open mind-set by an intrinsic
motivation whereas the open-mind set also includes the extrinsic motivation towards
idea generation.
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“We need to be more reactive, more proactive both. We need to react when
the market changes/ environment changes and we need to also proactively try
to influence the environment on the one hand and try to anticipate the
reaction” (Interviewee 13, code: pro-activeness/ motivation).
Lastly, the factors capabilities and reward are composed here, as they only have a
limited number of answers (eight and three comments). Capabilities were stated from
five different participants and the factor reward from three.
“I took the decision to only hire people that have competency in their field”
(Interviewee 4, code: capabilities).
Finally, three factors were first added to the template and then eliminated again due
to quantitatively less quotes. Those factors were: visibility, personal flexibility, and
easy access to innovation support.
The group comparison for the other factors, reveals that the factor reward is not
ticked, as it has per group less than 10 of the total comments. However, there were
comments on the reward systems from especially initiators and experts but
surprisingly not from contributors as those could have been assumed to put the
reward system as one focus factor for framework conditions. This will be
controverted in the discussion section. All group put the main focus on the factor
open mind-set with 25 comments in total. Table 13 summarizes the group
comparison.
Other Factors Initiator Expert Contributor
High Level of Education
Position in Top Management
Pro-activeness/ Motivation x x x
Individual Attitude
Open mind-set
x x x
Capabilities x x
Reward
Table 13 Group comparison for Other Factors
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Other Factors Discussion
In this section the remaining factors pro-activeness/ motivation, open mind set and
capabilities are discussed. Mainly the individual attitude towards idea generation
(open mind set) was mentioned under other factors saying that employees should be
open minded towards crazy ideas and experimentation in order to enforce innovation
and strategic entrepreneurship. Ireland et al. (2003) described this as entrepreneurial
mind set. An entrepreneurial mind set means the ability to capture the benefits of
uncertainty (McGrath and MacMillan, 2000; Ireland et al., 2003). Therefore, this
finding is supported by literature.
Furthermore, reward was not mentioned specifically by any group contrary to the
current literature. Hornsby et al. (2002) for example argue that an effective reward
system “can also enhance middle managers´ willingness to assume the risks
associated with entrepreneurial activity” (2002:259). This was only barely proved in
this study.
In the group initiator and expert, capabilities were stressed caused by their
experience in innovation saying that employees submitting an idea should be capable
to first develop the idea further and second be able to introduce the idea to the
network.
4.5.3 Innovation Factors
Results
The last chapter under conditions aims at exploring the completely new emerged
factors during the interview which did not fit to any other factor or family code.
Thus, this code family did not exist in the initial template but was emerging directly
after the first five interviews with the following codes: Visibility, time availability,
personal flexibility, communication, rules and routines, active involvement of
employees, access to resources, and an easy access to innovation support. After the
next five interviews three factors were eliminated again as those were not stated
anymore and had maximum one quote. After the last five interviews, no code was
eliminated or added but one was renamed by access to resources/ expert knowledge
as this name described better the content of the factor. The final five remaining
factors for the family code innovation factors were: time availability,
communication, rules and routine, active involvement of employees, and access to
resources/ expert knowledge.
77
Overall, 43 comments were made on innovation factors. 15 of them applied to access
to resources, the most emphasized factor in this family. Access to resources means
the access to a wide range of resources, mainly expert knowledge, budget, and
internal cooperation.
“[…] [An] obstacle is the expert community inside the company. To my
understanding these experts are not properly used. The understanding of this
community is not understood by themselves. To become an expert you need to
have a lot of work experience” (Interviewee 5, code: access to resources).
Time availability was the second frequently stated factor with 12 comments from
eight different interviewees. In the case participants commented on this factor they
put great emphasis on it because of workload and time pressure within the own
project and at worst in the innovation project as well. Those issues disable idea
generation, experimentation and cooperation.
“[…] too many people are hindered in their daily work because they have to
go to this Innovation meeting and hand in this proposal” (Interviewee 6,
code: time availability).
Rules and Routine as well as the factor active involvement of people are displayed
with seven quotes each whereas rules and routines were mentioned by four persons
and active involvement by six people. Rules and Routines mean the desire of some
participants to have a common understanding of innovation and innovation initiatives
with common rules and routines known in the whole company. This should add
value by engaging the people to innovate and not be stopped by complex innovation
processes.
78
“Sustainable, easy, here we are. So the thing is it is not clear who has which
responsibilities, who is doing what. And who can assist you with something
special. There are always people who talk. There is definitely no difference in
people who meet. But what is the outcome at the end of the day. And if there
is outcome, who of those people who have met has the power to put it
through” (Interviewee 7, code: rules and routines).
Lastly, the factor communication remains with four overall quotes from four
different people. This factor means enabling active communication channels between
employees and an active communication inside and outside the company about
innovation and idea generation.
“Communication is important. People need to be aware of what is happening
and we need to create an open market. What is possible and how can we do
it? Management need to get out of the comfort zone because sometimes they
are shocked […]” (Interviewee 1, code: communication).
For group comparison purpose, Table 14 is shown below. For innovation factors,
experts mainly contributed to this section focusing on access to resources and time
availability. Next, contributors also focused on access to resources as well the
initiator group whereas they could only less contribute to communication and active
involvement of employees.
Innovation Factors Initiator Expert Contributor
Visibility
Time Availability x x x
Personal Flexibility
Communication x
Rules and Routines x x x
Active Involvement of employees x x
Access to Resources x x x
Easy Access to innovation support
Table 14 Group comparison for Innovation Factors
79
Discussion
Lastly, innovation factors were introduced and analysed. Most of the employees
mentioned the necessity to have access to resources and expert knowledge.
Especially contributors focused on that because from experience they were missing
sufficient knowledge about for example business modelling, financing and market
analysis. For the application of Effectuation, this is a limitation as not only available
resources are regarded but also those of not or not yet committed stakeholders by
having access to expert knowledge, machines and tools for experimentation and off
course financial resources. Also Kuratko et al. (1990) stated the importance of
resource availability arguing that the access to resources is needed to foster
entrepreneurial activity (1990:55). Next, time availability was identified as condition
for implementing corporate Effectuation which can be supported by Hornsby et al.
(1999) stating that time availability and resource access can be summarized in one
factor fostering entrepreneurial activities (1990:55). Next, organizational rules and
routines are predefining the strategical direction of the company and give innovation
and idea generation a framework with a limited number of rules and routines for
example meetings on status of the project or workshops where contributors can learn
about how to raise a business. This is supported by organizational boundaries giving
a way to accommodate and reinforce innovation (Kuratko, 2010:142).
Also the raised factor involvement of employees and communication in a combined
matter is supported by literature arguing that if the expected outcome, goals, mission
and priorities are communicated entrepreneurial behaviour is enforced (Hornsby et
al. 2002:257).
Summarizing, conditions depend on the focused company, its environment and the
inherent degree of uncertainty but especially internal factors like the organizational
structure and cultural which need to incorporate certain entrepreneurial aspects in
order to gain competitive advantage and new market creation through Effectuation.
80
5 Conclusion
To conclude, this study aimed at finding organizational and human factor conditions
in order to apply Effectuation in a corporate context. This was an explanatory study
qualitative research approach using qualitative interviews as primary data and
quantitative data to find evidence of support.
The research questions tackled the question what are the conditions for the
application of Effectuation in a large corporation. The below shown figure answers
this questions summarizing the identified conditions which will be concluded below.
Figure 12 Conditions on applying Corporate Effectuation
Facing high uncertainty in new markets in the space industry and ongoing
competition in technological progress and competitive advantage, corporations
should make use of some of the effectual principles in order to enhance their
entrepreneurial activities and therefore their performance and competitive advantage.
Effectuation describes an entrepreneurial process in a dynamic way using pre-
81
existing resources trying to generate an idea out of it. With stakeholder commitment
additional resources are added to the cycle which can help developing the idea
changing goals. With this dynamic, new markets possibly can be created
(Sarasvathy, 2001). Findings support especially controllability and cooperation as
being valuable for the space industry driven by uncertainty and high risks caused by
new emerging space market and high costs in technological research and
developments.
Summarizing challenges identified, the company faces challenges regarding the
organizational culture (lack of vision, risk aversion, age structure, budget allocation)
and regarding the organizational structure (no flexible structures and processes and a
weak coordination of processes), as well as human factors (reactiveness,
demotivation).
However, employees in the company already think and in some cases also act
effectual in the way of using existing resources with the limitation that not only own
existing resources were used but also expert knowledge without pre stakeholder
commitment. Also cooperation is taking place in the thoughts and actions of
employees as the input and feedback of especially colleagues seem to be very
important. Employees also think that contingencies are something valuable for idea
development but they are not acting towards the lemonade principle due to
organizational restrictions (culture, structure). Only investing what one can afford to
lose is also only thought but not in actions as it might be difficult for employees to
perceive company resources like their own resources investing only what they can
afford to lose. However, employees only feel limited control of the future which
might be caused by deep hierarchical structures, a missing top management support
and a lack of vision provided by the company especially top management.
The following table summarizes the included and eliminated factors:
82
Main Factor Factor Literature Eliminated Included
Organizational Culture Horsnby et al., 1999
Failure Treatment Ireland and Webb, 2007 x
Project Evaluation Ireland and Webb, 2007 x
Experimentation Ireland and Webb, 2007; Sarasvathy,
2001a; Johansson and McKelvie, 2012x
Top Management SupportKuratko et al., 1990; Hornsby et al., 2002;
daCosta and Brettel, 2012x
Freedom template analysis developed x
Organizational Structure Kuratko et al. 1990
Number of Hierarchical Levels Johansson and McKelvie, 2012 x
Organic Management Style Ireland and Webb, 2007 x
FlexibilityIreland and Webb, 2007, Johansson and
McKelvie, 2012x
Separate Structure template analysis developed x
Effectual Factors
Means-driven Sarasvathy, 2001a x
Controllability Sarasvathy, 2001a; Arend, 2015 x
Risk Assumption
Ireland and Webb, 2007; Sarasvathy,
2001a; Moroz and Hindle, 2011; Kuratko,
1990
x
Use of contingencies Sarasvathy, 2001a x
CooperationIreland and Webb, 2007; Sarasvathy,
2001ax
Other Factors
High level of Education Johansson and McKelvie, 2012 x
Position in Top Management Johansson and McKelvie, 2012 x
Proactiveness daCosta and Brettel, 2012 x
Individual Attitude daCosta and Brettel, 2012 x
Capabilities daCosta and Brettel, 2012 x
Rewardtemplate analysis developed, proved by
Kuratko, 1990x
Open Mind-set template analysis developed x
Innovation Factors
Time Availability template analysis developed, proved by
Hornsby et al., 1999x
Communicationtemplate analysis developed, proved by
Hornsby et al., 2002x
Rules and Routinestemplate analysis developed, proved by
Hornsby et al., 2002, Kuratko, 2010x
Active Involvementof employeestemplate analysis developed, Pearce et al.,
1997x
Access to Recources/ Expert
knowledge
template analysis developed, Kuratko,
1990x
Table 15 Summary of eliminated and included factors of template analysis
The following chapter concludes managerial implications on the identified conditions
of the application of corporate Effectuation.
83
5.1 Managerial and Theoretical Implications
Managerial Implications
The following section shows a summary of the most important conditions identified
in this study enabling the company and managers of the company to start enhancing
effectual thinking and promoting effectual acting.
#1 Corporate Effectuation requires an entrepreneurial culture!
The existing company culture is a mix of French power distance and European
failure treatment many intrinsic motivated employees working passionate in the
space industry. However, the organizational culture need a more entrepreneurial
approach to enhance innovation with Effectuation. This should focus especially on
top management support encouraging people to develop ideas, experiment with
ideas, and collaborate with internal and external stakeholders and finally submitting
and developing ideas under the official umbrella of the company. Furthermore,
managers at all levels should enhance the employees perception of freedom to
innovate implementing for example several hours per week for innovation like 3M is
doing or giving every employee a certain amount of budget per year to develop
innovative ideas. The individual budget can then be combined with the ones of others
finding committed stakeholder and investors. Caused by the free distribution of the
individual allocated budget per year, employees feel responsible for it and may try to
only invest what they can afford to lose. Furthermore, this approach could possibly
raise innovation by it means and enhance promising ideas of other colleagues. A
failed investment however should not be punished but seen as something valuable
because of experience and learning. Failure treatment to a certain extent could also
be supported by allocating a certain amount of money to employees for innovation, if
this money is depreciated mainly anyways and if employees only have to justify in
which idea they invested but not if that investment was valuable. A kind of internal
market of idea investments would emerge out of this approach enhancing innovation
ideas and competitive advantage.
84
#2 Employee Effectuation is enhanced by a flexible organizational structure!
Next, Effectuation is enhanced by a flexible organizational structure meaning that the
company could possibly implement a separate organizational structure for innovation
with low hierarchical levels, fast decision making and a clear vision on the strategical
direction of the company and its investments. For the early stage of idea generation a
separate structure would not work but access to the separate structure could be
provided enabling employees to collaborate with others, experiment with their idea
and find expert knowledge which supports employees in business generation.
#3 Employee Effectuation is promoted by motivation and an open mind set!
The third managerial implication is that managers should promote Effectuation by
motivating people in the engineering and project department to innovate and be open
minded towards crazy ideas and the development of them. Not only the employees,
but also the management itself should be open minded towards crazy ideas and
support them with a good communication of strategic goals, the freedom to innovate
and the encouragement to fail. This could also enhance entrepreneurial and effectual
thinking.
#4 Time, available resources and a continuous communication enable employees to
act effectual!
Fourth, for not only thinking effectual but also acting effectual, managers should
enable employees to have the time to innovate beside their normal workload with
some hours free of normal work but time for collaboration and idea generation. In
addition, a continuous communication top-down is important to inform employees
about current activities and strategic goals. The communication in this company is
already implemented via the intranet informing people about current news about the
company. However, those news are very frequent and may should be divided in
several topic groups, one for innovation. Also a kind of internal market could be
implemented via the intranet where ideas can be exchanged, commented, supported
or joined. This would possibly solve the problem of many employees not having the
access to the real experts in the company who could give feedback or support the
idea. A division in innovation related topics on this shared news and market intranet
page would be beneficial here as well to simply the search for experts.
85
Summarizing, those recommendations are not a generalized approach for all
companies even not for all space companies as those differentiate significantly in
number of employees, revenue, and budget available for resources. However, the
recommendations made for this space company are beneficial for top managers,
middle and operational managers as well as employees and the whole company
enforcing competitive advantage, innovation and entrepreneurial behaviour, and the
organizational culture as this is crippled anyways because of restructure activities in
the past two years.
Theoretical implications
The theoretical contribution of this study encompasses the research on Effectuation,
corporate Effectuation and entrepreneurial processes in general researching on the
application of entrepreneurial behaviour especially Effectuation in a specific
corporate context and finding evidence for entrepreneurial thinking and acting. In
addition, this study investigated in entrepreneurial processes and Effectuation
enhancing innovation which was barely researched before. Furthermore, several
conditions for applying Effectuation were identified supported by and enforcing
current literature on corporate Entrepreneurship and Effectuation literature. Lastly,
this study examined conditions in specific groups named initiator, expert and
contributor, dividing target groups of Effectuation in innovation being able to
analyse the results depending on those groups.
For literature, the answers support the stated conditions of entrepreneurial behaviour
in a corporate context.
5.2 Limitations and Future Research
Limitations
This study also encompasses some limitations: first, the study focuses on only one
company in the space sector. This is valuable as company specific on the one hand
but results cannot be generalized by the whole space industry as especially new space
companies emerging in the US are differently organized (lower hierarchical structure
fast decision making, existence of a vision), funded (privately funded against
institutional funded in Europe), and located (different culture).
Second, Kuratko (2010) suggests to differentiate between three management levels in
order to analyse organizational antecedents of corporate entrepreneurship. In this
86
study, only top management support is regarded encompassing also middle and
operational management. This possibly causes a bias in the organizational culture
factor top management support and need to be differentiated.
Third, the sample focused on innovation initiatives and projects in innovation but
disregarded any other department primarily not working with innovation departments
but innovate on their own developing new technologies and new processes within the
department. These departments are not considered in this study.
Future Research
For future research it would be very interesting to test the findings of this study in
quantitative analysis with a large sample first within this company and second over
the space industry in order to prove evidence of those conditions. Furthermore, on
the basis of the found conditions, the application in other technology based industries
could be tested and proved. Results revealed the cultural influence on the application
of Effectuation stating that top management support may depend on the respective
cultural background. This would be an attractive field of research to what extent the
organizational culture has an influence on the application of corporate Effectuation
involving French and German cultural influences on top management support, failure
treatment, experimentation, and the freedom to innovate.
VI
APPENDICES
Appendix A: Interview Guideline (page 1/2)
VII
Appendix A: Interview Guideline (page 2/2)
VIII
Appendix B: Declaration of Consent (English Version)
:
IX
Appendix C: Declaration of Consent (German Version)
X
Appendix D: Questionnaire PAVE test (page 1/4)
XI
Appendix D: Questionnaire PAVE test (page 2/4)
XII
Appendix D: Questionnaire PAVE test (page 3/4)
XIII
Appendix E: Questionnaire PAVE test (page 4/4)
XIV
Appendix F: Initial Template
Initial Template1 Challenges in Innovation
1 Inflexible Processes
2 Budget Allocation
3 Demotivation
2 Application of Effectuation
1 Bird in Hand
2 Affordable Loss
3 Lemonade
4 Crazy Quilt
5 Pilot in the Plane
3 Conditions for Corporate Effectuation
1 Organizational Factors
1 Organizational Culture
1 Failure Treatment
2 Project Evaluation
3 Experimentation
4 Top Management Support
2 Organizational Structure
1 Number of Hierarchical Levels
2 Organic Management Style
3 Flexibility
2 Human Capital Factors
1 Effectual Factors
1 Means-driven
2 Controllability
3 Risk Assumption
4 Use of contingencies
5 Cooperation
2 Other Factors
1 High level of Education
2 Position in Top Management
3 Proactiveness
4 Individual Attitude
5 Capabilities
XV
Appendix G: 1st Revised Template
First Revised Template1 Challenges in Innovation
1 Inflexible Processes
2 Budget Allocation
3 Demotivation
4 Lack of Vision
5 Risk Aversity
6 No Access to Resources
7 No Freedom to innovate
8 Coordination of Processes
9 No flexible organizational structure
10 Costs
2 Application of Effectuation
1 Bird in Hand
2 Affordable Loss
3 Lemonade
4 Crazy Quilt
5 Pilot in the Plane
3 Conditions for Corporate Effectuation
1 Organizational Factors
1 Organizational Culture
1 Failure Treatment
2 Project Evaluation
3 Experimentation
4 Top Management Support
5 Freedom
6 Solidarity to Company
7 Risk Acceptance
2 Organizational Structure
1 Number of Hierarchical Levels
2 Organic Management Style
3 Flexibility
4 Separate Structure
2 Human Capital Factors
1 Effectual Factors
1 Means-driven
2 Controllability
3 Risk Assumption
4 Use of contingencies
5 Cooperation
2 Other Factors
1 High level of Education
2 Position in Top Management
3 Proactiveness
4 Individual Attitude
5 Capabilities
3 Innovation Factors
1 Visibility
2 Time Availability
3 Personal Flexibility
4 Communcation
5 Rules and Routines
6 Active Involvement of employees
7 Access to Resources
8 Easy Access to innovation support
XVI
Appendix H: 2nd Revised Template
Second Revised Template1 Challenges in Innovation
1 Inflexible Processes
2 Budget Allocation
3 Demotivation
4 Lack of Vision
5 Risk Aversity
6 No Access to Resources
7 No Freedom to innovate
8 Coordination of Processes
9 No flexible organizational structure
10 Costs
11 No Reactiveness
12 Age Structure
13 No Feedback
14 Workload
2 Application of Effectuation
1 Bird in Hand
2 Affordable Loss
3 Lemonade
4 Crazy Quilt
5 Pilot in the Plane
3 Conditions for Corporate Effectuation
1 Organizational Factors
1 Organizational Culture
1 Failure Treatment
2 Project Evaluation
3 Experimentation
4 Top Management Support
5 Freedom
6 Solidarity to Company
7 Risk Acceptance
2 Organizational Structure
1 Number of Hierarchical Levels
2 Organic Management Style
3 Flexibility
4 Separate Structure
2 Human Capital Factors
1 Effectual Factors
1 Means-driven
2 Controllability
3 Risk Assumption
4 Use of contingencies
5 Cooperation
2 Other Factors
1 High level of Education
2 Position in Top Management
3 Proactiveness
4 Individual Attitude
5 Capabilities
6 Reward
3 Innovation Factors
1 Visibility
2 Time Availability
3 Personal Flexibility
4 Communcation
5 Rules and Routines
6 Active Involvement of employees
7 Access to Resources
8 Easy Access to innovation support
XVII
Appendix I: 3rd Revised Template
Third Revised Template1 Challenges in Innovation
1 Inflexible Processes
2 Budget Allocation
3 Demotivation
4 Lack of Vision
5 Risk Aversity
6 No Access to Resources
7 No Freedom to innovate
8 Coordination of Processes
9 No flexible organizational structure
10 Costs
11 No Reactiveness
12 Age Structure
13 No Feedback
14 Workload
2 Application of Effectuation
1 Bird in Hand
2 Affordable Loss
3 Lemonade
4 Crazy Quilt
5 Pilot in the Plane
3 Conditions for Corporate Effectuation
1 Organizational Factors
1 Organizational Culture
1 Failure Treatment
2 Project Evaluation
3 Experimentation
4 Top Management Support
5 Freedom
6 Solidarity to Company
7 Risk Acceptance
2 Organizational Structure
1 Number of Hierarchical Levels
2 Organic Management Style
3 Flexibility
4 Separate Structure
2 Human Capital Factors
1 Effectual Factors
1 Means-driven
2 Controllability
3 Risk Assumption
4 Use of contingencies
5 Cooperation
2 Other Factors
1 High level of Education
2 Position in Top Management
3 Proactiveness/ Motivation
4 Individual Attitude Open-minded
5 Capabilities
6 Reward
3 Innovation Factors
1 Visibility
2 Time Availability
3 Personal Flexibility
4 Communcation
5 Rules and Routines
6 Active Involvement of employees
7 Access to Resources/ Expert knowledge
8 Easy Access to innovation support
XVIII
Appendix J Final Template
Final Template1 Challenges in Innovation
1 Inflexible Processes
2 Budget Allocation
3 Demotivation
4 Lack of Vision
5 Risk Aversity
6 Coordination of Processes
7 No flexible organizational structure
8 No Reactiveness
9 Age Structure
2 Application of Effectuation
1 Bird in Hand
2 Affordable Loss
3 Lemonade
4 Crazy Quilt
5 Pilot in the Plane
3 Conditions for Corporate Effectuation
1 Organizational Factors
1 Organizational Culture
1 Failure Treatment
2 Experimentation
3 Top Management Support
4 Freedom
2 Organizational Structure
1 Number of Hierarchical Levels
2 Organic Management Style
3 Flexibility
4 Separate Structure
2 Human Capital Factors
1 Effectual Factors
1 Means-driven
2 Controllability
3 Risk Assumption
4 Use of contingencies
5 Cooperation
2 Other Factors
1 Proactiveness/ Motivation
2 Capabilities
3 Reward
4 Open mind set
3 Innovation Factors
1 Time Availability
2 Communication
3 Rules and Routines
4 Active Involvement of employees
5 Access to Resources/ Expert knowledge
XIX
Appendix K Interview Translations: original quotes
Footnote 5
„Die Firma hat aber schon ein Jahr vorher wissen wollen, welche Projekte wir letztendlich
einreichen könnten, damit die Budgets festgelegt werden können. Die Festlegung der Budget
geschieht in einem Zyklus, in einem Zeitrahmen, der mit vernünftigen Innovationen und
kurzfristigem Entwickeln von Strategien, Technologien, neuen Ideen, vollkommen
inkompatibel ist“ (Interviewee 3, code: budget allocation)
Footnote 6
„Wiederum Angst vor Risikoübernahme, eigene Mittel zu übernehmen und hoffen, dass man
Investoren bekommt, bevor man weitere Wege geht“ (Interviewee 11: code: risk aversion).
Footnote 7
„Also aus der Markterfahrung, die wir gesammelt haben, aus den Kundengesprächen, aus der
ganzen Aktivität heraus und der gegenseitigen Diskussion ist jetzt ein modifizierter Weg
geworden, der letztendlich für das Geschäft, was begonnen wurde, eine geringe Modifikation
bedeutet aber Wegbereiter für ein größeres Geschäft nämlich […] [Projekt] war“ (Interviewee
2, code: lemonade).
Footnote 8
„Du musst es wissen, du musst es wollen, du musst es treiben. Nur du kennst dich und dein
Geschäft, deine Persönlichkeit im übertragenen Sinne am besten und weißt wo deine Stärken
und Schwächen sind und ergo welche Schwächen du besiegen musst und wo deine Partner
sind, damit du das erreicht“ (Interviewee 3, code: pilot in the plane).
XX
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